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

The Dollar Is Getting Used to Defeat

Everything has its limits—including Donald Trump's negotiation strategy. The longer his policy of threats followed by postponements continues, the less seriously markets take his actions. His warnings are no longer

Marek Petkovich 20:39 2025-05-27 UTC+2

Inflation in the Eurozone Gives the ECB Room to Act

The euro declined after the release of inflation data from France and the GfK report from Germany. Exactly three years ago, eurozone data showed inflation had risen to 8.1%. Immediately

Jakub Novak 20:26 2025-05-27 UTC+2

XAU/USD. Analysis and Forecast

Gold is extending its decline for the second day in a row. The pressure on gold is driven by a combination of factors: optimism stemming from U.S. President Donald Trump's

Irina Yanina 19:38 2025-05-27 UTC+2

USD/JPY. Analysis and Forecast

The Japanese yen continues to weaken during intraday trading. One of the key factors putting pressure on the yen is Japan's decision to consider reducing the issuance of ultra-long-term bonds

Irina Yanina 19:35 2025-05-27 UTC+2

Trump drives market rhythm

Much ado about nothing. President Trump's announcement of 50% tariffs on imports from the European Union starting June 1—only to delay them until July 9—barely rattled financial markets. Investors

Marek Petkovich 12:11 2025-05-27 UTC+2

Bank of Japan Plans To Raise Rates Further

Despite the Bank of Japan's plans to continue raising interest rates, the yen is currently heading in a very different direction. During his speech today, Bank of Japan Governor Kazuo

Jakub Novak 11:32 2025-05-27 UTC+2

Christine Lagarde Believes in the Euro

The European currency showed little reaction yesterday to a speech by European Central Bank President Christine Lagarde, who stated that the unpredictable policies of President Donald Trump present an excellent

Jakub Novak 11:19 2025-05-27 UTC+2

Markets Anxiously Await U.S. Senate Debate on Increased Government Spending (Possible Limited Decline in GBP/USD and Gold Prices)

The U.S. dollar remains under pressure. What's next, and what are its prospects? The trade war initiated by Donald Trump has significantly damaged the reputation of the U.S. dollar, which

Pati Gani 09:53 2025-05-27 UTC+2

GBP/USD Overview – May 27: The British Pound Remains Stable

The GBP/USD currency pair continued its upward movement on Monday. It is important to point out that the situation with the euro is rather complex and unstable. The euro

Paolo Greco 08:03 2025-05-27 UTC+2

EUR/USD Overview – May 27: The President Spoke, Then Changed His Mind

On Monday, the EUR/USD currency pair resumed its upward movement as soon as the market opened. The recent decline of the U.S. dollar last week was again caused

Paolo Greco 08:03 2025-05-27 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.