Nasdaq Nears 10% Monthly Gain—But Can the Market Withstand a $300M Tariff Blow?

Wall Street Pushes Higher Despite Tariff Shockwaves, Pension Flows, and Inflation Fears

Nasdaq, S&P 500, and Dow Navigate Through May’s Final Turbulence

With May nearing its close, the Nasdaq Composite (^IXIC) is on pace for a near-10% monthly rally, the S&P 500 (^GSPC) is up more than 6%, and the Dow Jones Industrial Average (^DJI) has climbed roughly 4%. These gains are occurring despite escalating volatility tied to U.S.-China trade uncertainty, pension rebalancing flows, and incoming inflation data. Futures wobbled into Friday with E-mini S&P 500 (ES=F) down 0.67% to 5,883.25, E-mini Nasdaq 100 (NQ=F) off 0.69% to 21,259.75, and E-mini Dow (YM=F) slipping 0.46% to 42,071. Treasury yields remain subdued with the 10-year holding near 4.42%, showing limited concern about near-term Fed tightening.

Tariff Reinstatement Roils Global Equities, Sends Asia into Retreat

Markets initially rallied after a federal trade court blocked former President Trump's tariffs. But after the U.S. Appeals Court swiftly stayed the ruling, reinstating duties while the White House prepares a formal challenge, global equities turned lower. The administration is now eyeing a Trade Act of 1974 clause to legally impose up to 15% tariffs for 150 days, a stopgap weapon if broader authority is denied.

Asian indices took the brunt of the news:

• Nikkei 225 (^N225) fell 1.22% to 37,965.10

• Kospi (^KS11) dropped 0.84%

• Hang Seng Index (^HSI) slumped 1.48% to 23,289.77

• CSI 300 (3188.HK) lost 0.48%

• ASX 200 (^AXJO) edged up 0.3%

Chinese tech names crumbled. Alibaba (9988.HK) dropped 4.4%, Tencent (0700.HK) shed 2.49%, and Baidu (9888.HK) fell 3.6%, dragged by fears of a deeper decoupling in AI technology access.

Gap Inc. (NYSE:GAP) Suffers $300M Tariff Blow, Shares Crater

While most U.S. retailers are avoiding price hikes amid cost pressures, Gap Inc. (GAP) shocked the market by estimating $250M–$300M in added costs from renewed tariffs. Shares fell 14.5% premarket, hitting $23.89. Despite better-than-expected revenue of $3.46B and EPS of $0.51, the outlook for Q2 was flat, compounding investor fears. CEO Richard Dickson reaffirmed Gap's plan to shrink China sourcing to below 3% by end-2025, aiming for no single country to represent over 25% of supply by 2026.

The company expects an operating income hit of up to $150M, and despite internal cost-offset strategies, sentiment remains sour. A major drag on the stock comes from concerns that future guidance does not fully incorporate tariff fallout.

Verdict: Bearish. Without pricing power or detailed mitigation strategies, the downside risk outweighs upside, especially under Trump’s renewed tariff framework.

Costco (NASDAQ:COST) Defends Margin, Shows Retail Strength

Costco delivered strong Q1 numbers with EPS of $4.28, beating estimates, while revenue of $63.2B slightly missed expectations. Same-store sales rose 8%, well ahead of the 6.99% consensus. U.S. sales surged 7.9%, and international markets exceeded 8.5%.

Pre-market, shares drifted slightly lower to $1,005.66, but the pullback appears technical. CEO Ron Vachris credited margin strength to strategic price reductions on key staples like eggs and butter. Despite no full-year guidance, Wall Street expects $275B in revenue and $18.15 EPS for FY25.

Verdict: Hold. While valuation is rich, Costco continues to execute, and strong same-store growth offsets minor revenue softness.

Dell Technologies (NYSE:DELL) Surges on AI-Driven Demand

Dell rallied 5% after Q1 revenue hit $23.38B, beating estimates of $23.14B. The company raised FY earnings guidance and cited robust demand for AI servers. With AI infrastructure demand acting as a growth lever, Dell's hardware-centric model is pivoting into margin-enhancing data solutions.

Verdict: Buy. The guidance revision paired with accelerating AI deployment in data centers positions Dell as an underappreciated beneficiary of enterprise transformation.

Ulta Beauty (NASDAQ:ULTA) Rips 8% Higher on Strong Sales

Shares of Ulta (ULTA) exploded nearly 9% after-hours following a 4.5% sales jump to $2.8B and Q2 guidance above expectations. EPS landed at $6.70, and operating leverage helped the company navigate a soft discretionary environment.

Ulta’s ability to lift Q2 expectations while navigating macro headwinds shows strong consumer brand loyalty and pricing power in beauty retail.

Verdict: Bullish. With few signs of consumer fatigue and strong margins, ULTA stands out in retail.

Trump’s Tariff Strategy Spurs Inflation, Uncertainty Over Policy

While Treasury Secretary Scott Bessent downplays tariff-related disruption to U.S.-China trade talks, investor nerves remain frayed. Bessent confirmed talks are "a bit stalled" and will require direct contact between Trump and President Xi to resume progress. The administration’s fallback to the 1974 Trade Act signals that even if the current court appeal fails, the White House has legal avenues for temporary tariff enforcement.

Traders are awaiting the April PCE inflation print, expected at 2.2% YoY headline and 2.6% core, which is above the Fed’s 2% target. Economists like Gene Goldman expect little reaction unless revisions to January and March surprise on the upside.

The inflation debate may reignite in June, especially if PCE surprises, given Fed policymakers’ cautious stance. A hot reading could reverse recent dovish tones and weigh on risk assets.

Pension Rebalancing Risk Looms Over Friday Session

Goldman Sachs estimates $20 billion in equity selling from U.S. pension funds to rebalance portfolios after May’s stock rally outpaced bonds. As these institutional trades hit the tape, they may create short-term headwinds for indices—even as macro sentiment remains intact.

Nvidia (NASDAQ:NVDA): Geopolitics Test AI Giant’s Resilience

Nvidia’s earnings strength is indisputable, but the company faces a $8B revenue hit in Q2 due to export restrictions to China. Yet, this vulnerability may turn into leverage—acting as a bargaining chip in trade negotiations. As Washington uses chip bans to press Beijing, Nvidia’s missed revenue may become a catalyst for a broader technology-access compromise.

Verdict: Buy on pullback. Despite geopolitical drag, the fundamentals remain intact, and Nvidia’s dominance in AI remains unmatched.

Investor Sentiment: Bearish Bias Returns

According to the AAII sentiment survey, bearish sentiment jumped to 41.9%, while bullish views slid to 32.9%—both diverging from historical averages. Notably, 64% of investors cite tariffs, inflation, or the economy as the top concern for the next six months.

This dovetails with ongoing market fragility despite gains in equities. Under the surface, macro unease, tax fears (including Trump’s so-called “revenge tax” targeting foreign investors), and persistent inflation keep volatility elevated.

That's TradingNEWS