In the wake of the United States’ credit rating downsizing at the commencement of the week, a degree of pessimism washed over the markets. However, according to the insights shared by Lale Akoner from eToro, it’s crucial not to overreact. History has often shown that these credit adjustments tend to trail behind the real-time economic indicators. This perspective seemingly emboldened investors, as, despite a turbulent start, the subsequent rally in US stocks was noteworthy.
As the trading day concluded, both the Dow Jones Industrial Average and the S&P 500 managed to end on a positive note despite the initial setbacks. The resilience of the S&P 500 was particularly impressive as it now stands less than 3% shy of its peak performance, having surged over 23% from the previous month’s low points. This remarkable recovery underscores the significance of the US retracting its stern stance on trade tariffs, a strategic move that has evidently borne fruit in stabilizing the markets.
Moreover, the bond market reacted to the day’s developments with the yield on 10-year Treasury notes ticking upwards, continuing to flirt with the 4.5% threshold – a level not seen since January when it hovered close to 4.75%. Though discussions around bond yields might seem mundane to some, their movement is essential. Should the yield on 10-year notes edge even closer to or surpass the 5% mark, it could instigate fears of escalating borrowing costs, which would have wider implications for both the economy and markets.
Despite the buoyant mood amongst stock market bulls and those with a long-term investment horizon, one cannot overlook the prevailing risks and headwinds that could potentially temper the current market enthusiasm.
Turning our attention to the corporate sphere, Home Depot’s pre-market activity offered insights into investor sentiment surrounding the company. Shares in Home Depot observed a modest uptick of over 2% ahead of trading, in anticipation of the company’s mixed quarterly report which surprisingly missed on profits yet exceeded revenue forecasts. The anticipatory movements in Home Depot’s stock value reflect a pattern of tempered reactions post-earnings announcements, a trend that has persisted over the previous seven quarters.
Notably, Wall Street analysts maintain a bullish outlook on Home Depot, projecting a notable upside with an average 12-month price target that significantly exceeds its current valuation. Chart analysis prior to this disclosure showed potential for the stock to breach significant technical levels which could pave the way for further gains, depending on the day’s trading dynamics.
Moreover, for individuals seeking alternative investment strategies, options trading offers a route to capitalize on Home Depot’s potential market movements. Both bullish and bearish strategies could be employed, depending on one’s market outlook, with the risk for options buyers strictly limited to the premium paid.
Aside from corporate earnings, market participants had their gaze fixed on several key sectors and forthcoming reports that could offer further insights into the overarching market direction. The spotlight was particularly focused on commodities, with gold experiencing a noteworthy climb this year. Additionally, the earnings announcement from Palo Alto Networks was eagerly awaited, given its significant rebound in recent times, to gauge the sustainability of its growth trajectory. Another point of interest lay in the imminent earnings report from Lowe’s, which, akin to Home Depot’s disclosures, would provide a clearer picture of consumer sentiment towards large-scale purchases and home renovations amidst ongoing economic developments.
In wrapping up, it is essential to acknowledge the inherent unpredictability and volatility within markets. The scenarios and stock movements discussed here are subject to rapid changes, underscoring the importance of thorough research and consideration before undertaking any investment strategies. This narrative serves as an educational overview and should not be construed as a definitive investment recommendation. Every investment carries a degree of risk, and past performance should not be solely relied upon when making future investment decisions.
Monday’s session started off underwater thanks to the US credit downgrade, but in my opinion, eToro’s Lale Akoner nailed the takeaway — “Don’t overreact to the downgrade itself. History shows these calls often lag the fundamentals.” — helping pave the way to a solid rally in US stocks.
That’s as the and both finished higher yesterday despite a rough open.
The S&P 500 is now down less than 3% from its record high and is now up more than 23% from its lows last month. It’s been a remarkable comeback and shows just how important it was for the US to walk back those tough tariff talks.
Despite the stock’s eking out a gain, yesterday’s news did send the higher too, while the continues to hover near 4.5% — its highest level since January when it was near 4.75%.
I know bonds can be boring to talk about. But if we see the 10-year inch toward those year-to-date highs, fear will grow that it will climb to (and potentially surpass) 5%.
All this is to say that the latest run has been outstanding for bulls and long-term investors, but there are still some headwinds and risks out there to be aware of.
The Setup — Home Depot
Home Depot Inc (NYSE:) shares are inching higher in pre-market trading, up a little more than 2%. The rally comes amid a mixed quarterly report where the firm missed on , but beat on revenue expectations.
The mild move in pre-market trading is nothing new. In fact, in the prior seven quarters, the one-day change after Home Depot reported earnings has seen the stock move less than 3% (and five of those instances were less than 1.5%).
That doesn’t mean today’s move can’t be larger, just that muted reactions have become common for this stock. For what it’s worth, analysts see longer-term upside, with an average 12-month price target north of $425.
Chart as of the close on 5/19/2025. Source: eToro ProCharts, courtesy of TradingView.
Bulls hope the stock will reclaim a notable technical level following today’s price action, irrespective of its magnitude.
That’s as the $377 to $382 range has become a notable support/resistance area over the past few quarters, and as the 200-day moving average hovers in the upper-$380s. Bulls will want to see HD reclaim these measures, potentially opening up more upside in the name. Bears will want to see this area hold as resistance, potentially putting more downside pressure in play.
Options
For some investors, options could be one alternative to speculate on HD. Remember, the risk for options buyers is tied to the premium paid for the option — and losing the premium is the full risk.
Bulls can utilize calls or call spreads to speculate on further upside, while bears can use puts or put spreads to speculate on the gains fizzling out and HD rolling over.
What Wall Street is Watching
GLD (NYSE:) – Gold was all Wall Street seemed to talk about earlier this year, as it got off to a blistering start and as stocks were pounded. Gold is still up more than 20% this year, and the GLD ETF has recently tested — and so far held — its 50-day moving average as support. Will buyers come back into gold, or has it lost some of its lustre?
PANW – Palo Alto Networks (NASDAQ:) will report earnings after the close. The stock has rebounded more than 33% from the recent lows, but investors are looking for direction on the fundamentals. Analysts expect adjusted earnings of 77 cents a share on revenue of $2.27 billion, representing growth of roughly 17% and 15%, respectively.
LOW – Home Depot reported earnings this morning, and Lowe’s (NYSE:) is scheduled to report tomorrow morning. Investors will use these two companies to get a better idea about the housing market and how consumers are approaching large purchases right now, like home remodels. Investors are also looking for clues on how tariffs may be impacting these decisions as well.
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Disclaimer: Please note that due to market volatility, some of the prices may have already been reached and scenarios played out. Content, research, tools, and stock symbols displayed are for educational purposes only and do not imply a recommendation or solicitation to engage in any specific investment strategy. All investments involve risk, losses may exceed the amount of principal invested, and past performance does not guarantee future results.
