The S&P 500 gapped lower; although the index spent the session trying to rebound, it ended 0.64% lower on no major trade news. The buying that had been driven by hopes of a turnaround in trade winds over the past nine sessions is gently losing momentum. Still, there are some minor developments: India is considering zero tariffs on sectors including steel and auto parts, and Trump keeps saying that trade deals will be announced as soon as this week. So, we wait.

In FX, the US dollar remains softer across the board; its rapid selloff against Asian peers was particularly in focus over the past two sessions and raised concerns about the dollar’s status as a safe haven and reserve currency. It’s now said that Asian countries may be rushing to convert their dollar-denominated export revenues into local currencies to avoid holding USD in an increasingly uncertain trade and geopolitical environment.

Taiwan, on the other hand, denied rumours of any FX agreement that would allow the US dollar to depreciate to improve US companies' price competitiveness abroad. As mentioned, there's still chatter that some trade deals could be announced this week, but the week began with Trump’s latest threat of 100% tariffs on foreign-made films to save the ‘dying Hollywood’—not actual trade deals.

As such, Netflix and Disney gapped lower at Monday open. Although prices recovered as the session advanced, Netflix ended the day nearly 2% lower, and Ford became the latest company to warn that tariffs will hurt. Palantir, on the other hand, stood out from the crowd of worried companies, calling AI demand a ‘ravenous whirlwind,’ announcing better-than-expected earnings, and raising its full-year revenue forecast. Alas, the results fell short of expectations, and even Palantir dropped more than 9% in after-hours trading.

From here, the lack of good news on the trade front will likely discourage bulls from extending the latest rally. Yet, I firmly believe that optimistic investors are positioning to catch the moment when potential tariff deals pop and trigger a rebound—they just don’t want to miss the rally by coming in too late. That mindset could help limit losses if the suspense doesn’t last long and trade deals really materialize.

Data-wise, the latest ISM services report showed a faster-than-expected expansion in US activity in April and accelerating price pressures. Combined with relatively strong jobs data last month and an improved Atlanta Fed growth estimate for Q2, this has tempered expectations for US rate cuts. In fact, the Atlanta Fed’s GDPNow forecast points to 1.1% Q2 growth, thanks in part to an improved trade deficit after Q1 imports surged in anticipation of tariffs, pushing Q1 growth into negative territory. We’ll see if—and by how much—Q2 growth improves after the initial tariff-led frontloading.

It’s clear the Federal Reserve (Fed) will want to wait and see how tariffs affect growth and inflation before making its next move. As such, this week’s policy meeting is not expected to bring any rate changes. Fed funds futures pricing suggests an almost 99% chance of no cut this week—but traders still expect three cuts this year, with the first potentially coming this summer.

For now, though, the current data pushes against expectations of a June cut. As the Fed begins its two-day meeting, the probability of a June rate cut is under 30%. Chair Powell’s post-decision press conference will be key to gauging whether the FOMC leans toward cutting in June due to economic headwinds or opts to wait for clarity on tariffs and inflation. So far, the rebound in the US 2-year yield suggests markets are giving more weight to the "wait and see" approach.

Last week’s yield rebound—along with renewed hope for trade deals—helped the dollar recover, yet a hesitant Fed could still weigh on US growth expectations and keep the dollar under pressure. The EURUSD remains bid below the 1.13 mark, the USDJPY is back below 144, and the Swiss franc couldn’t weaken despite a softer-than-expected inflation reading yesterday, which supports expectations that the Swiss National Bank (SNB) will cut rates to zero in June.

For equities, central bank stances will continue to shape risk appetite, and for now, European equities remain in a better position than their US peers.

Earnings season, meanwhile, has been fairly strong for S&P 500 companies, but solid results have been overshadowed by downward revisions to earnings forecasts. Analysts also cut their own EPS estimates for Q2 by a larger-than-average margin during April. FactSet notes that analysts usually reduce estimates in the first month of a quarter, but this year’s 2.4% decline exceeds the five-year average of 1.8%. In short, the S&P 500’s gains won’t be solidified until there’s more clarity on trade, and large US companies with international exposure will continue to struggle under the weight of uncertainty.