The U.S Stock Market Rallies as Attention Shifts to Tesla's Earnings

U.S. stocks managed to rebound on Tuesday after a sharp decline in the previous session, as investors turned their attention to Tesla Inc.’s upcoming earnings report. The S&P 500 gained 1.7%, and the Nasdaq 100 rose by 2.0%, recovering from Monday’s losses, which were driven largely by former President Donald Trump’s renewed push for Federal Reserve Chair Jerome Powell to cut interest rates. Meanwhile, the Cboe Volatility Index (VIX), a key measure of market fear, hovered around 31, signaling ongoing investor anxiety.

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The dollar held steady after a previous slide that saw it reach a 15-month low. Despite the pause, Goldman Sachs suggested that dollar weakness is likely to persist for the foreseeable future. Analysts noted that the steep market drop on Monday occurred on unusually low trading volume, suggesting that the selloff was more about a lack of buyers than an overwhelming rush to sell. “With the Treasury market and the dollar finally stabilizing, the stock market is seeing this as a welcome relief,” explained Matt Maley of Miller Tabak.

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Tuesday's main event is Tesla’s first-quarter earnings release, scheduled for after the closing bell. The electric vehicle company has had a rocky start to the year, with shares down 41% in 2025 amid concerns over slumping demand and CEO Elon Musk’s political controversies. Wall Street has drastically revised growth forecasts downward, and Wedbush Securities even issued a “code red” warning ahead of the results, contributing to another drop in Tesla’s share price on Monday.

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Russ Mould, investment director at AJ Bell, noted that investors are keen to understand how the recent decline in deliveries is affecting Tesla's financial performance. Many analysts attribute the downturn in sales to Musk’s increasingly controversial involvement in politics.

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Morgan Stanley’s Adam Jonas wrote in a Tuesday note that Tesla’s results are expected to show the narrowest profit margins in more than a decade. He added that the market’s reaction will likely depend on the company’s ability to address concerns about low margins, potential cash burn, and whether Musk appears more focused on running the business than on outside interests.

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Elsewhere in the market, Boeing shares jumped after announcing a deal to sell parts of its digital aviation unit to private equity firm Thoma Bravo. Lockheed Martin also saw gains after posting better-than-expected sales figures, while Verizon fell as it reported a larger-than-expected drop in mobile subscribers. RTX Corp., formerly Raytheon, tumbled on news that tariffs stemming from Trump’s trade policy could significantly damage its profit outlook. Northrop Grumman also declined after slashing its earnings forecast due to rising costs for its B-21 stealth bomber program.

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Investor sentiment remains subdued. “People are bracing for either a recession or a prolonged period of stagflation,” said Irene Tunkel of BCA Research. “Given this backdrop, few are willing to step in and buy the dip. Most are sticking with a defensive strategy.”

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Meanwhile, gold briefly surged above $3,500 per ounce—its highest level on record—before paring gains. The move came as fears over Trump potentially removing Powell from his post spurred a broad flight from U.S. assets, including stocks, bonds, and the dollar. According to Societe Generale’s Alain Bokobza, if Trump’s trade policies continue, the global shift away from American assets could persist for several years.

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There were, however, some bright spots. U.S. Vice President JD Vance’s trip to India, aimed at strengthening bilateral ties, signaled potential progress toward a trade agreement. Japan’s finance minister also expressed interest in closer currency policy coordination with U.S. Treasury Secretary Scott Bessent, suggesting that international cooperation may offer some economic stability.

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Looking ahead, UBS strategists warned that U.S. equities could continue to weaken in the near term. However, they forecast a rebound, predicting the S&P 500 could climb back to 5,300 by the end of 2025—or even reach 5,500 if tariffs on Chinese goods are halved.

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The rest of the week is packed with earnings from major corporations. But according to BCA Research’s Tunkel, investors are now paying closer attention to forward-looking corporate guidance rather than just quarterly numbers. “As companies start to feel the effects of tariffs and the trade war,” she explained, “we expect a wave of negative or withdrawn forecasts for the second quarter and an accompanying flurry of analyst downgrades.”

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In short, while the market found its footing on Tuesday, uncertainty still looms large, especially as economic and political factors continue to weigh heavily on investor confidence.

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