empty
12.06.2025 04:53 PM
Market sells facts

Markets rise on rumors and fall on facts. For a long time, the S&P 500 had been rising due to investors' confidence in a US-China trade agreement. Once the deal was signed, investors rushed to lock profits on long positions. Donald Trump announced that the deal had been eventually signed, under which US tariffs on imports from China would be 55%, while Chinese tariffs on US exports would be 10%.

Commerce Secretary Howard Lutnick claims that the issue is now settled, and tariffs on imports from China will no longer rise. Treasury Secretary Scott Bassett announced that the 90-day tariff delay could be extended for countries that are negotiating in good faith with the US. These remarks by White House officials were a continuation of the previous tactic aimed at supporting the S&P 500 rally through bold statements. The market, however, preferred to sell the facts.

Daily dynamics of the S&P 500

This image is no longer relevant

The broad stock index has not been this calm since December. Over the past 11 out of the last 12 trading sessions, it has moved by no more than 0.6% in either direction. Sooner or later, the calm in the stock market will be replaced by a storm.

Along with the desire of investors to lock in profits on long positions following the conclusion of the US-China trade deal, the decline of the S&P 500 was also driven by disappointment. A series of positive reports on the health of the US economy, including strong May nonfarm payrolls, led people to believe that everything was fine. However, doubts resurfaced among investors due to the weak momentum in inflation.

US inflation dynamics

This image is no longer relevant

The persistent disinflationary trend may be linked to two reasons: either domestic demand has tanked so much that it no longer supports price increases, or companies, which accumulated significant inventories during the front-loading of US imports, are artificially keeping prices down. This is to observe how consumers react.

Most likely, the S&P 500 took the first reason at face value. Signs of weakness in the US economy spooked the "bulls" and forced the broad stock index to retreat. The benchmark index didn't find support from the likelihood of monetary expansion in the US. Meanwhile, the odds of one act of monetary tightening by the Federal Reserve in 2025 dropped from 39% to 32%, while the chances of three or more steps by the central bank to ease monetary policy rose from 22% to 28%.

This image is no longer relevant

The 21% rally in the S&P 500 from the April lows allowed traders to ignore the underlying issues. However, once the broad stock index retreated, these issues came into focus. As the US economy is cooling, tariffs have been reduced but they are still in place. The reaction of inflation to these tariffs is unknown. Uncertainty breeds fear.

Technical outlook on the S&P 500

On the daily chart of the S&P 500, the inability of the bulls to break above 6,060 became a sign of their weakness and led to the formation of short positions. The reason to increase these positions would be a further drop in the broad stock index below 5,995.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Igor Kovalyov
Start trade
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

USD/JPY. Analysis and Forecast

On Monday, the Japanese yen is struggling to capitalize on a modest correction amid a weaker US dollar. Sunday's elections to Japan's upper house of parliament put strong pressure

Irina Yanina 19:43 2025-07-21 UTC+2

XAU/USD. Analysis and Forecast

At the start of the European session on Monday, gold showed a positive tone, but the price continues to trade within a multi-week range. The US dollar, retreating from

Irina Yanina 19:36 2025-07-21 UTC+2

Bitcoin gathering strength for leap

FOMO — the fear of missing out — has been the main driver behind the BTC/USD rally. Regardless of how much is said about the US passing crypto-friendly legislation, capital

Marek Petkovich 13:27 2025-07-21 UTC+2

NZD/USD. Analysis and Forecast

Trade-related uncertainty continues to call for caution among traders with a bullish bias. At the start of the European session, the NZD/USD pair partially recovered its intraday losses. However

Irina Yanina 12:40 2025-07-21 UTC+2

Gold Resumes Its Uptrend

Gold rose at the opening of the Asian session on Monday as traders evaluated differing views among U.S. Federal Reserve officials on how President Donald Trump's tariff policy might affect

Jakub Novak 12:03 2025-07-21 UTC+2

No Consensus on Interest Rates Within the Federal Reserve

Judging by recent comments from several Federal Reserve officials, the committee has yet to reach a consensus on interest rate policy. While some members continue to stress the need

Jakub Novak 12:01 2025-07-21 UTC+2

The Euro May Get a Chance to Rise

Traders preparing for the upcoming European Central Bank meeting this Thursday, which will focus on setting interest rates, should also pay close attention to numerous economic reports this week

Jakub Novak 11:59 2025-07-21 UTC+2

Good news already priced in?

Not long ago, Donald Trump could send Wall Street into turmoil with a single social media post. Now, he is threatening to fire the Fed chair and remove the firewall

Marek Petkovich 09:13 2025-07-21 UTC+2

What to Pay Attention to on July 21? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic reports scheduled for Monday. Therefore, weak market movements can be expected. Of course, Donald Trump could unexpectedly return to the spotlight at any moment with

Paolo Greco 04:01 2025-07-21 UTC+2

EUR/USD Weekly Preview: Tariff Saga, ECB Meeting, PMI and IFO Indices

The penultimate week of July lies ahead. We will learn the outcome of the next European Central Bank meeting as well as the July figures of key macroeconomic indicators. Additionally

Irina Manzenko 00:07 2025-07-21 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.