Published May 9, 2025
As expected, the furious recovery in stock prices has stalled, for now, at the clear point of resistance shown below. We spoke of this resistance coming into play a couple of weeks ago as well. Bulls have been able to push past the 550-560 level. The question is whether the bulls have enough thrust to push stocks back above the 5700 level for the S&P 500 (570 on the chart), which is where the widely-followed 200-day/40-week moving average sits.
This weekend’s tariff talks with China are likely to answer that question. The hurried (“niche”) deal with the U.K. this week perhaps portends the more accommodating stance of the Trump Administration, though foreign officials said the deal offered little “roadmap” for other nations.
Under the surface of the market, some sectors have shown strength. Of particular note has been the move in software (shown below). It’s possible that the AI trade has now shifted from semiconductors to applications software as semiconductors continue to be front and center in trade war disputes with China.
Market Update
Investors looked to build on the prior week’s strong rebound as the calendar turned from April to May this week, while four of the market’s biggest, most influential stocks were set to post earnings. Monday saw flat trade ahead of those reports. A reduction in tariff impacts on automobiles combined with welcome earnings news from a flurry of Dow Industrial components to lift stocks +0.6% Tuesday. But a negative first quarter GDP report issued Wednesday morning sent stocks sharply lower to start that day’s trading. The 2-3% morning downswing was reversed in the afternoon, however, a welcome response for the bulls. The parsing of the GDP data showed a huge surge of imports ahead of the tariff implementation to be the primary cause of the negative print. Strong earnings reports from Microsoft and Meta powered stocks Thursday to kick off the month of May with a +1.5% rise in the Nasdaq. A solid monthly jobs report kept the mood positive Friday despite a downdraft in shares of Apple following an uninspiring earnings outlook. Shares of Amazon likewise sparked no buying after a similarly cautious earnings forecast. Nonetheless, the Nasdaq overcame that lack of help to close higher by +1.5%.
Stocks posted a second strong weekly advance to recover all of the early April losses. The S&P 500 (SPY) rose +2.93% while the Nasdaq 100 (QQQ) added +3.44%. Small cap stocks (IWM) joined the upswing with a +3.28% gain.
Warm wishes and until next week.