empty
25.04.2025 11:57 AM
The Market Has Nowhere Left to Run

While Donald Trump and Beijing are still trying to figure out whether trade negotiations between the U.S. and China are happening at all, the S&P 500 continues to climb for a third straight day — this time thanks to dovish rhetoric from the Federal Reserve. FOMC member Christopher Waller suggested that tariffs would only cause a temporary increase in prices, which the Fed should ignore. However, cooling in the labor market, he said, could prompt a resumption of monetary expansion.

Markets seem to intuitively feel that the tariffs announced on America's "Liberation Day" are the limit — the White House is unlikely to go any further. Import duties will likely be reduced, and the U.S. economy is expected to avoid a recession. This is also supported by the sharp increase in durable goods orders in March. As a result, the S&P 500's late-April rally is being led by those who have suffered the most from protectionism — namely tech stocks and the "Magnificent Seven."

However, there are growing doubts about the wisdom of moving capital from North America to Europe. Around 60% of companies included in the EuroStoxx 600 index generate their revenues abroad. A weaker U.S. dollar negatively impacts their financial performance.

U.S. Dollar vs. EuroStoxx 600 Basket Dynamics

This image is no longer relevant

At the same time, a falling dollar isn't great news for the U.S. market either. Only about one-third of S&P 500 companies are export-oriented — their foreign currency revenues will rise. But two-thirds are focused on the domestic market. Rising import prices reduce Americans' purchasing power and cut into corporate revenues.

The current S&P 500 rally has limited upside, as the White House shows no signs of abandoning its tariff policies or its push to bring manufacturing back to America. Escalation of the trade war with China is only a matter of time. Furthermore, the uncertainty surrounding Washington's protectionist policies will inevitably impact the U.S. economy, reviving recession concerns.

U.S. Dollar vs. S&P 500 Earnings Outlook

This image is no longer relevant

Given this backdrop, the most likely scenario is a period of consolidation for the broad stock index. The exact range of this consolidation will become clearer over the next few trading sessions.

This image is no longer relevant

Thus, in the U.S. stock market, fear has temporarily given way to greed, allowing the S&P 500 to recover part of its losses and exit correction territory. Currently, the index is down less than 6% for the year — compared to as much as 15% in early April.

Technically, on the daily chart, bulls have activated a "1-2-3" pattern by breaking above fair value at 5400. This allowed traders to build long positions. However, this does not signal a return to a full uptrend. On the contrary, a rejection at resistance levels of 5500, 5625, or 5695 would be a signal to take profits and possibly reverse direction. The base case remains a medium-term consolidation in the broad stock index.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

EUR/USD: Calm Before the Storm? The Market Awaits News from London

The EUR/USD pair continues to trade within a 100-pip price range of 1.1350–1.1450, bouncing between its boundaries. Buyers are trying to hold within the 1.14 area, while sellers

Irina Manzenko 00:38 2025-06-10 UTC+2

The Dollar Feels Its Strength

A strong economy means a strong currency. In early June, the U.S. economy began to look strong again. EUR/USD bears anticipate a correction in the current upward trend, prompted

Marek Petkovich 00:38 2025-06-10 UTC+2

Strong Employment Report Supports the Canadian Dollar

Net employment change in May amounted to +8.8 thousand jobs, exceeding April's growth and presenting very strong data, especially against expectations — a loss of about 15 thousand jobs

Kuvat Raharjo 15:05 2025-06-09 UTC+2

AUD/USD. Analysis and Forecast

At the beginning of the new trading week, the AUD/USD pair is showing steady upward momentum, recovering from a slight pullback and once again approaching the highs seen in November

Irina Yanina 14:51 2025-06-09 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair is showing moderate weakness on Monday, dropping toward the psychological level of 144.00. The decline is driven by a combination of factors, including the strengthening

Irina Yanina 14:05 2025-06-09 UTC+2

WTI - West Texas Intermediate. Analysis and Forecast

At the start of the new week, prices for West Texas Intermediate (WTI) crude oil are attempting to stay near Friday's highs. Senior U.S. officials, including Treasury Secretary Scott Bessent

Irina Yanina 14:02 2025-06-09 UTC+2

Old Donald the Fighter Seems to Have Broken Down (there is a likelihood of continued growth in CFD contracts #NDX and #SPX)

Despite all the hardships, uncertainty, and overall market tension, stock indices persistently climb higher. Investors believe that Donald Trump will have to back down and retreat in his confrontation with

Pati Gani 10:06 2025-06-09 UTC+2

China and the U.S. Take a Serious Step Toward Each Other

The euro and the pound have recovered from Friday's losses, gradually resuming their upward movement. This is supported by the resumption of U.S.-China negotiations today, aiming to further ease tensions

Jakub Novak 09:21 2025-06-09 UTC+2

What to Pay Attention to on June 9? A Breakdown of Fundamental Events for Beginners

No macroeconomic reports are scheduled for Monday. Thus, traders will have nothing to react to during the day. There is a high probability of flat or weak movements unless Donald

Paolo Greco 05:54 2025-06-09 UTC+2

GBP/USD Overview – June 9: Nonfarms Did Not Disappoint

The GBP/USD currency pair also traded lower on Friday and even settled slightly below the moving average line. While we constantly say there are no reasons for the pound

Paolo Greco 04:03 2025-06-09 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.