When Might Market Rally Momentum End?

In the last two days, the stock market's rallying momentum showed signs of strain. On Tuesday, for example, sellers sent the Nasdaq (QQQ) and S&P 500 (SPY) lower in the early afternoon. In the last hour of trade, buyers re-entered to erase some of the day’s losses.

Stock markets added around $9 trillion in value in the last month. Liberation Day tariffs on April 2, followed by worries that the government would replace the Fed Chair, triggered the selling. More recently, the U.S. softened its tariffs against China for 90 days. Similarly, the U.S. paused tariffs on its trading partners for 90 days as well.

Investors still need to price in the impact of the lower tariff rates in those 90 days.

Fortunately, this has not raised inflation yet. Companies are selling down their inventory first. But once they buy more goods, they will pass tariff-related costs to their customers. Walmart (WMT) already warned consumers of price hikes in the next two months.

Home Depot (HD) said that it would not raise prices due to tariffs. CFO Richard McPhail said that the company has great partnerships with its suppliers. As a result, it will not change pricing levels across its portfolio. Home Depot posted a 9.5% Y/Y increase in revenue in the first quarter, to $39.9 billion.

HD stock rose on Tuesday. Lowe’s (LOW) also rose thanks to Home Depot’s results.