Major U.S. stock indices closed mixed, with earlier gains fading despite a U.S.-EU tariff agreement. The S&P 500 was almost unchanged, and the Dow Jones Industrial Average stayed mostly negative during the session.
The week ahead is packed with economic events, including the FOMC rate decision, U.S. jobs report, and second-quarter GDP release. Investors remain cautious, as uncertainty over the new tariff’s influence on inflation persists. Additionally, the earnings season intensifies with reports from Amazon, Apple, Meta, and Microsoft, alongside rate announcements by the Bank of Canada and Bank of Japan.
Market Closing Figures
The closing figures were: Dow down by 64.36 points (-0.14%) at 44,837.56, S&P 500 up by 1.13 points (+0.02%) at 6,389.77, NASDAQ increased by 70.27 points (+0.33%) at 21,178.58, and Russell 2000 declined by 4.34 points (-0.19%) at 2,256.72.
Notable stock performances included Super Micro Computer rising 10.24% due to AI and data center enthusiasm. AMD and ASML saw gains following the US-EU trade deal on semiconductors. Nike improved by 3.89% after a JPMorgan upgrade, and Exxon Mobil increased 2.62% from a rally in crude prices influenced by tighter supply and sanctions on Russia.
With the Federal Reserve’s decision and the U.S. jobs report imminent, we expect significant market swings. The CBOE Volatility Index (VIX) has been hovering near a relatively low 12, which suggests options are inexpensive right now. This presents an opportunity to position for a volatility expansion, perhaps through straddles on broad market indices.
Focus on Tech Giants
Our attention turns to the giants reporting this week, including the companies behind Windows and the iPhone. Looking back at the last eight quarters, these megacap tech stocks have averaged a post-earnings move of around 5%, creating a clear opportunity for those who correctly anticipate the direction. We will look to trade the expected price gaps around these specific announcements.
We are watching the semiconductor space closely, which has rallied on the new trade agreement. The VanEck Semiconductor ETF (SMH) is up over 50% year-to-date, indicating powerful momentum but also raising the risk of a sharp pullback. We believe using call spreads is a prudent way to participate in further upside in names like the one run by Su while defining our maximum risk.
The caution in the market, coupled with record cash in money market funds now exceeding $6.1 trillion, creates a coiled spring effect. We feel this “fear of missing out” could fuel a sharp move higher if this week’s economic data comes in favorably. For this scenario, we are positioning with out-of-the-money call options on the NASDAQ 100, offering leveraged upside with limited capital at risk.
