empty
15.05.2025 09:20 AM
The Market Fears Nothing

From an ugly duckling to a beautiful swan, the S&P 500 has shifted from a highly overbought stock index in early April to a considerably oversold one. Since 1950, there have only been six instances when it rose by 18% or more in just 24 trading sessions. This V-shaped recovery in the U.S. stock market resembles its behavior during the COVID-19 era, attracting new buyers like bees to honey. Could the feeling of euphoria soon turn into disappointment?

V-shaped recoveries in the US stock market

This image is no longer relevant

The S&P 500 rally is underpinned by U.S. economic resilience, reduced trade tensions, and a strong influx of investment. Deals between the White House, the UK, and China, along with Aramco's $90 billion agreements with U.S. firms, have calmed investor nerves. The Saudi Arabian corporation signed a 20-year contract for LNG from Texas, partnered with Exxon to modernize a refinery in the Middle East, and teamed up with NVIDIA to develop cutting-edge industrial AI infrastructure. The latter sparked renewed demand for tech stocks.

The S&P 500's February–April dip was mainly due to investors abandoning the "Magnificent Seven" amid fears that the U.S. had lost its exceptional status. Competition from DeepSeek, concerns that tariffs would kill Tesla's business, and other alarmist narratives led to the sell-off of previously lucrative assets. But things changed in May.

Fear no longer dominates the market, as shown by the parallel movement of the S&P 500 and the 2-year Treasury yields. Historically, when economic optimism is high, both tend to rise together. Conversely, during investor panic, both decline.

Dynamics of S&P and US bond yields

This image is no longer relevant

Rising bond yields typically indicate trouble for stocks, as they increase company expenses and squeeze corporate profits. Not this time. Treasuries are being dumped not out of fear, but due to fading recession risks in the U.S. economy — and that's great news for the S&P 500.

Unsurprisingly, the broad index remains unaffected by the Federal Reserve's decision to keep interest rates high. The futures market, which forecast four rate cuts in 2025 as recently as April, now sees only two as likely. San Francisco Fed President Mary Daly says the strength of the U.S. economy allows the central bank to remain patient.

This image is no longer relevant

Given the current situation, only a significant decline in U.S. macroeconomic data could halt the S&P 500's rally. The upcoming retail sales report is a potential risk factor for the bulls.

Technically, on the daily chart, a fierce battle continues between buyers and sellers around the 5900 pivot level, which is a kind of red line for the S&P 500. A win for the bulls would justify forming or increasing long positions, while a loss would open the door for short trades.

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

Gold Rebounds as Fiscal Risks Resurface

Gold is swinging between extremes as spring draws to a close. The week ending May 16 was the worst for the precious metal due to optimism that, following a trade

Marek Petkovich 17:31 2025-05-23 UTC+2

AUD/JPY. Analysis and Forecast

Today, the AUD/JPY pair has started to attract buying interest, halting its pullback from the monthly high as demand for the Australian dollar emerges. Today's talks between U.S. Deputy Secretary

Irina Yanina 17:25 2025-05-23 UTC+2

USD/CAD. Analysis and Forecast

The pair is trending lower, dropping close to the key psychological level of 1.3800 amid broad-based U.S. dollar weakness. Traders have raised their expectations for Federal Reserve rate cuts following

Irina Yanina 16:43 2025-05-23 UTC+2

USD declares war on EUR

What's new is often just what's been forgotten. As spring draws to a close, the long-dismissed mantra "sell America" is making a comeback in markets. The phrase gained traction following

Marek Petkovich 14:59 2025-05-23 UTC+2

USD/JPY: what happens with yen?

The USD/JPY pair is experiencing heightened price turbulence. At the end of April, the pair sharply declined, hitting a 7-month low at 139.90. Then, last week, a northbound impulse pushed

Irina Manzenko 13:52 2025-05-23 UTC+2

Market Chaos to Continue (There is a likelihood of continued local declines in #USDX and gold prices)

Markets continue to act blindly amid the chaotic actions of Donald Trump, who is trying to pull the U.S. out of a deep, all-encompassing crisis like Baron Munchausen pulling himself

Pati Gani 10:19 2025-05-23 UTC+2

The Market Tucks Its Tail

A necessary project at the wrong time. The House of Representatives has approved Donald Trump's tax cut initiative. The President hopes it will help stimulate the economy and offset shortcomings

Marek Petkovich 09:29 2025-05-23 UTC+2

GBP/USD Overview – May 23: No Talks, but Hang in There

On Thursday, the GBP/USD currency pair traded relatively calmly, but like EUR/USD, it has been rising for two weeks. At first glance, one might wonder what reasons traders have

Paolo Greco 08:15 2025-05-23 UTC+2

EUR/USD Overview – May 23: The Rebellion Against the Dollar Continues

The EUR/USD currency pair traded relatively calmly on Thursday, yet it has risen significantly over the past two weeks. This movement can be interpreted in several ways. From a technical

Paolo Greco 08:15 2025-05-23 UTC+2

What to Pay Attention to on May 23? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Friday. Only two are noteworthy: the final estimate of Germany's Q1 GDP and April's UK retail sales data. The German GDP report

Paolo Greco 05:58 2025-05-23 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.