The market has been holding up well overall, though it’s clear that investors are staying cautious, especially with key economic reports and corporate earnings just around the corner. Powell’s testimony today added another layer of attention, and it’s a good time to review how the markets are responding, how some popular stocks are moving, and what recent developments could mean in the short to medium term.
Tuesday’s session saw the U.S. dollar index slip by 0.6%, while Treasury yields for the 2-year and 10-year terms dropped by 4 and 5 basis points. TLT bounced back with a 0.7% gain. Over the past week, the dollar index is down about 1%, and yields have come down as well,13 basis points for the 2-year and 9 for the 10-year. The major indices all performed strongly on Tuesday, with the S&P 500, Nasdaq, and Dow up around 1% to 1.4%. The weekly gains now hover close to 2%, showing solid momentum.
Gold and oil both pulled back, partly reflecting easing tensions in the Middle East. The VIX dropped another 2%, which is a sizable move and suggests that short-term volatility expectations have declined. The Russell 2000 also rebounded by 1.3% on the day, and Bitcoin saw a 2.3% jump. Among the sectors, semiconductors stood out with a sharp 3.8% rise. That’s a remarkable turnaround considering that earlier in the year, chips were among the worst-performing sectors, down more than 25% at one point. Now, year-to-date gains are up to 9.1%, placing the sector third overall in performance rankings.
Interestingly, among the major tech names, Apple has been the weakest so far this year, down around 20% YTD. But its long-term fundamentals remain solid. With the growing overlap between stable coins, AI agents, and operating systems, Apple’s control over the OS layer may become increasingly valuable. Many software firms are now building walls around their data, limiting external access. In the future, only platforms like Apple’s OS might retain the ability to access and integrate data across apps in a privacy-preserving way, an important edge in the era of intelligent agents.
From a valuation perspective, Apple isn’t particularly cheap or expensive, it’s trading at a level that’s relatively neutral when looking back over the last five years. This makes it a reasonable place to look for long-term value while also allowing some room for short-term tactical moves.
Tuesday’s FedEx earnings added another important data point for understanding the current economy. The company reported after the close and saw its stock decline, primarily due to weaker-than-expected forward guidance. Management cited persistent macroeconomic uncertainty and refrained from providing a full-year outlook, something investors were clearly hoping for. Despite cost-cutting efforts and plans to use free cash flow for dividends and buybacks, FedEx still sees demand as soft, especially in industrial sectors. The company also mentioned that trade between the U.S. and China deteriorated sharply in April due to tariffs, and although things haven’t worsened further, recovery has been slow.
The FedEx report highlights how macro uncertainty continues to weigh on corporate decision-making. It’s a reminder that while some parts of the market are performing well, underlying demand in many areas remains fragile. Looking ahead, earnings from major banks, particularly Bank of America, will be crucial in gauging how consumer spending is holding up. Banks tend to offer the clearest window into real-time economic activity, especially with tariffs and policy shifts coming into play.
For Powell’s testimony, he emphasized that the next two months of inflation data will be critical. The Fed wants to assess whether recent tariffs are materially affecting prices. This ties back to earlier comments where Powell mentioned a couple of months as the timeframe to watch. If the upcoming inflation reports, June and July, come in with month-over-month increases of 0.3% or less, a September rate cut seems likely. And if both reports show 0.2% or lower, a 50-basis-point cut could even be on the table. That’s because, as Powell and Fed insiders have hinted, the only reason rates weren’t already cut is the uncertainty around tariffs. Should inflation stay muted, the Fed might play catch-up and cut more aggressively.
The market is currently pricing in one rate cut in September, but expectations for 2025 have been climbing. Not long ago, traders were expecting fewer than two cuts next year. Now the number has edged closer to 2.5. While September is the immediate focus, the broader outlook is becoming more dovish.
As for risks, over the next 3 to 6 months, there don’t appear to be many structural issues. Most of the concern lies in the data: GDP, inflation, and employment will be the main drivers of market direction. The Fed’s path remains relatively clear in the near term. Shorter-term, though, July could bring some turbulence. The corporate buyback blackout window kicks in, limiting support from repurchases, and the Treasury may need to increase debt issuance, which could put upward pressure on yields.
One last point worth noting is market participation. A few weeks ago, participation was falling even as the major indices held up, signaling internal weakness. Since then, breadth has improved. On Tuesday, the 20-day moving average participation rate climbed back to 70% for the S&P 500, 66% for the Russell 2000, and 56% for the Nasdaq. This kind of recovery in participation is generally a healthy sign and suggests the rally is broadening beyond just a few heavyweights.
There’s a lot to watch in the coming weeks, especially inflation reports and the start of Q3 earnings season. While the market has shown strength, underlying signals are still mixed, and staying nimble remains key.