Markets Extend Streak Despite Buffett's Warning

Wall Street just kept climbing, stringing together an impressive nine-day winning streak that finally snapped on May 2, 2025. This run clawed back sharp losses from April, largely thanks to powerhouse tech earnings and whispers of a potential softening on the tariff front. But don't get too comfortable; warning signs, including a massive cash hoard held by a certain Oracle of Omaha, suggest the game isn't won yet.

Insights

• The stock market completed a nine-day winning streak ending May 2, 2025, recovering losses from April's tariff-driven selloff.
• Strong Q1 2025 earnings reports, particularly from tech giants like Microsoft and Meta, were the primary engine behind the rally.
• Speculation about a potential easing of trade tensions and tariffs provided an additional tailwind for market sentiment.
• Despite the rally, mixed economic signals (strong jobs vs. contracting GDP) and caution from influential investors like Warren Buffett create uncertainty.
• Key commodity markets like oil hit multi-year lows, while gold retreated from recent record highs, adding to the complex picture.

Why the Market Rallied: Tech Earnings and Tariff Hopes

This rebound marks a sharp reversal from the gloom that settled over markets just weeks ago.

Remember April's "Liberation Day" tariff announcement? That sent shivers down spines and indices tumbling. What changed?

Primarily, big tech delivered. Blowout earnings reports from sector leaders showed surprising resilience, convincing investors that profits could still grow even in a murky economic environment.

Add to that some tentative signs and market chatter suggesting the administration might be rethinking its aggressive tariff stance. Hope, even a sliver of it, can be potent fuel.

But let's be clear: this wasn't just irrational exuberance. It was a reaction to tangible earnings beats and a potential policy shift, layered on top of a market that was arguably oversold after the April shock.

Nine Days of Gains: Tech Leads the Charge

The market's climb over these nine sessions was significant, though heavily tilted towards the technology sector.

The S&P 500 surged nearly 9% during the eight trading days leading into May 2nd, a powerful snapback.

Tech and growth stocks were the undisputed stars. Microsoft shares soared 10% and Meta jumped over 5% on May 1st alone, following stellar results. Nvidia wasn't far behind, gaining around 4% that day. And look at DexCom – its shares exploded 16.2% higher on May 2nd after crushing Q1 revenue expectations, making it the S&P 500's biggest winner.

While improved market breadth is always welcome, this rally felt concentrated. When a few behemoths drive the indices, you have to question the foundation's strength across the board.

What really greased the wheels for this tech resurgence? Strong earnings, plain and simple. While the 10-year Treasury yield hovering around 4.15% as of May 2nd isn't exactly "low," it has stabilized from more volatile periods, providing less of a headwind for growth stock valuations compared to past spikes.

Jobs Report Eases Downturn Fears (For Now)

Just as the rally was peaking, we got a crucial piece of economic data: the April 2025 U.S. jobs report.

Released on May 2nd, the numbers showed surprisingly strong employment growth, beating economists' forecasts.

Markets took this as a positive sign. It helped calm nerves frayed by earlier data showing the U.S. economy actually contracted in the first quarter of 2025 – the first such decline in three years.

A robust labor market suggests the economy might have more resilience than the Q1 GDP figures indicated. It pushes back against immediate fears of a deep downturn, giving bulls something to hang their hats on.

But don't mistake one jobs report for a clean bill of health. The underlying tension between a shrinking economy and a still-strong job market is confusing, to say the least.

Recovery Erases April's "Liberation Day" Losses

This nine-day surge effectively wiped the slate clean after April's tariff-induced panic.

That "Liberation Day" announcement triggered a sharp correction, reminding everyone how quickly policy shifts can rattle investor confidence.

The subsequent rally has pulled major indices back from those lows. As of May 2nd, the S&P 500 is now down less than 4% for the year – a much better position than it looked just a couple of weeks ago.

However, smaller companies, often more sensitive to domestic economic shifts and borrowing costs, haven't bounced back quite as strongly. The Russell 2000 index of small-cap stocks, while participating in the rally, continues to lag its large-cap counterparts year-to-date. This divergence often signals underlying caution about the broader economy's health.

Lingering Concerns: Economic Clouds and Buffett's Caution

Despite the recent market relief, plenty of reasons for caution remain.

The conflicting signals from GDP (negative) and jobs (positive) paint a murky economic picture. How does the impact of past policy decisions and global pressures fully play out? Nobody knows for sure.

And then there's Warren Buffett.

Berkshire Hathaway's latest earnings report revealed its cash pile has continued to swell, reaching a new record high (reports suggest figures approaching or exceeding $190 billion). While Buffett rarely comments on short-term market moves, sitting on that much cash speaks volumes.

Is he seeing a lack of attractively priced opportunities? Is he bracing for turbulence ahead? Either way, it's hardly a table-pounding buy signal from one of the world's most respected investors.

"Do not save what is left after spending; instead spend what is left after saving."

Warren Buffett Chairman and CEO of Berkshire Hathaway

This classic advice underscores a discipline that seems reflected in Berkshire's current stance: patience and prudence, especially when bargains are scarce.

Beyond Buffett, the Q1 2025 earnings season, while spectacular for some tech giants, showed a more cautious tone elsewhere. Many management teams flagged ongoing uncertainty about demand, costs, and the general economic path forward.

Look at the commodity markets too. Oil prices (WTI crude) slumped to around $58 a barrel, hitting four-year lows – not typically a sign of booming global demand. Gold futures backed off from their record highs near $3,500 hit in late April, trading around $3,230.

Even Bitcoin, that volatile beast, reflects uncertainty. While showing strength, it faces key resistance levels around $100,000 and $107,000, with potential support zones eyed near $92,000 and $85,000. Its next move could offer clues about broader risk appetite.

Analysis

So, what's the real story here? The market just staged a powerful counter-attack, driven almost entirely by Big Tech earnings and a whiff of hope on the tariff front. It successfully battled back against the fear sparked by April's policy bombshells and worrying Q1 GDP numbers.

But this feels less like a broad, healthy advance and more like a targeted strike led by a few generals (Microsoft, Meta, etc.). While the strong jobs report provided covering fire, the underlying economic terrain remains treacherous – contracting growth, nervous consumers outside the tech bubble, and cautious signals from commodities and seasoned investors like Buffett.

The reliance on tech earnings is both a strength and a vulnerability. If these giants continue to deliver, they might keep pulling the market higher. But any stumble, any sign that even tech is feeling the pinch, could quickly unravel the recent gains. Similarly, if the tariff relief hopes prove unfounded, expect another wave of selling.

This isn't a market running on all cylinders. It's a market running on specific fuel sources that could sputter. Investors are essentially betting that tech exceptionalism can outweigh broader economic concerns and that policy headwinds might ease. That's a calculated gamble, not a sure thing.

The key question is whether this rally has legs or if it's just a bear market bounce fueled by temporary relief and sector-specific strength. The evidence remains mixed, demanding a clear head and careful strategy, not blind optimism.

Final Thoughts

The nine-day winning streak was a welcome sight after April's turbulence. It showed the market's ability to seize on good news, particularly when it comes from the influential tech sector.

But don't let the green arrows lull you into complacency. The fundamental picture is far from clear. We have contracting GDP fighting strong job numbers, stellar tech earnings contrasting with broader corporate caution, and tariff hopes bumping against geopolitical realities.

Warren Buffett isn't building a record cash hoard because everything looks cheap and cheerful. Commodity prices aren't signaling runaway growth.

The next major checkpoint will likely be the Federal Reserve's meeting in June 2025. While rate hikes aren't the immediate concern they once were, the Fed's tone on inflation, growth, and overall policy direction will be scrutinized intensely. Any hints about their view on the economic contradiction or future policy leanings could easily sway markets.

Navigating this requires discipline. It means appreciating the rally's drivers (tech strength, policy hope) while respecting the risks (economic slowdown, concentration risk, potential policy disappointment). It means being selective, managing risk, and keeping some powder dry.

The game hasn't fundamentally changed – it's still about separating signal from noise and making smart decisions based on probabilities, not predictions.

Stay sharp.

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Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or tax advice. The opinions expressed are those of the author and do not necessarily reflect the views of any affiliated institution. Investing involves risks, including the possible loss of principal. Past performance is not indicative of future results. Always conduct your own research and consult with a qualified financial professional before making any investment decisions. Market conditions can change rapidly, and the information provided may not remain accurate.