To The Moon

$S&P 500(. $S&P 500(.SPX)$ )$ $Dow Jones Industrial Average(. $Dow Jones(.DJI)$ )$ $Eli Lilly and Company( $Eli Lilly(LLY)$ )$ $Technology Select Sector SPDR Fund( $Technology Select Sector SPDR Fund(XLK)$ )$ $NVIDIA Corporation( $NVIDIA(NVDA)$ )$

The stock market kicked off the week with a bang on April 21, 2025, as a temporary pause in tariff escalation provided a much-needed breather for investors. The S&P 500 surged 2.8% to close at 4,885, clawing back some of its 9% year-to-date loss, while the Dow Jones Industrial Average jumped 3.1% to 42,150, marking its best single-day gain since November 2024. This relief rally comes after weeks of volatility triggered by President Trump’s tariff policies, but with uncertainty still looming, can the momentum hold? Let’s break down the drivers, sector impacts, and what’s next.

Tariff Pause Fuels Market Optimism

On April 18, 2025, President Trump announced a 90-day pause on additional tariffs, citing progress in trade talks with the EU and China. This follows a tumultuous period since his initial tariff announcement on April 2, which saw the S&P 500 plummet into a bear market and the Nasdaq shed over 20% YTD. Trump’s comments about a potential “very good deal” with China lifted spirits, as did his softened stance on Federal Reserve Chair Jerome Powell, whom he had threatened to fire just days ago.

• Market Sentiment: The VIX, a measure of market fear, dropped from 52.3 on April 8 to 28 today, signaling reduced volatility.

• Global Impact: Asian markets followed suit, with Japan’s Nikkei 225 gaining 1% on April 18, reflecting cautious optimism.

However, analysts warn that this reprieve may be temporary. The baseline 10% tariff on imports remains in place, and the World Trade Organization projects a 0.2% decline in global trade volume for 2025 if tensions persist.

Sector Winners: Health Care and Tech Lead the Charge

The rally wasn’t uniform across sectors. Health care and tech stocks, battered in recent weeks, saw the biggest gains:

• Health Care: Eli Lilly (LLY) soared 14% last week after its experimental weight-loss pill matched Ozempic’s efficacy, and it added another 5% today. The Health Care Select Sector SPDR Fund (XLV) rose 3.5%.

• Tech Recovery: Despite a 7% plunge last week due to export curbs on chips to China, NVIDIA (NVDA) rebounded 4% today. The Technology Select Sector SPDR Fund (XLK) gained 2.8%.

• Laggards: Defensive sectors like utilities saw muted gains, with investors rotating into riskier assets.

Performance Table (April 21, 2025)

Visualizing the Rally:

The graph shows the S&P 500’s sharp decline post-tariff announcement, followed by today’s rebound.

Bull vs. Bear: Is This a Dead Cat Bounce?

Bull Case

• Trade Progress: If Trump’s deals materialize, the S&P 500 could rally to 5,200 by mid-year, as projected by Wells Fargo.

• Sector Strength: Health care and tech gains signal investor confidence in innovation-driven sectors.

Bear Case

• Lingering Uncertainty: The 90-day pause may just delay the inevitable—tariffs could return, dragging markets lower.

• Recession Risks: Economists peg recession odds at 45% for 2025, with JPMorgan’s Bruce Kasman warning of a downturn.

My Take: Today’s rally is a welcome relief, but I’m skeptical of its staying power. The underlying trade issues remain unresolved, and a recession could derail any gains. I’m playing it cautious for now.

Trading Strategy: Seize the Rally, Hedge the Risk

• Health Care Play: LLY at $800—buy with a $780 stop, target $850. Its drug pipeline looks unstoppable.

• Tech Dip: NVDA at $105—buy on pullbacks to $100, stop at $95, target $115. Export curbs are priced in.

• Hedge: Grab SPY $480 puts to protect against a tariff-driven reversal.

My Plan: I’m allocating 40% to XLV, 20% to NVDA on a dip, and keeping 40% in cash to navigate volatility.

Risks to Watch

• Trade Talks Breakdown: If negotiations falter, expect a swift market drop.

• Earnings Season: Upcoming reports from tech giants could reveal tariff impacts.

• Fed Policy: A hawkish Fed move in May could pressure growth stocks further.

Your Move?

The market’s relief rally is in full swing, but uncertainty looms large. Are you riding LLY’s wave, buying NVDA on dips, or hedging with puts? Share your trades below—let’s navigate this together!

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📝 Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

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