Published May 16, 2025
Stocks have rebounded largely from the April selloff. Our friends at Delta Research outline the recovery and first quarter earnings results below:
“In basketball playoffs, teams fight all season for home court advantage. For investors, that advantage lies above the S&P 500’s 200-day moving average. On March 7, the index fell below this key level, followed by a “death cross” on April 14, when the 50-day moving average crossed below the 200-day. This week, on May 12, the S&P 500 roared back above its 200-day moving average, signaling a potential shift.
The index has erased its year-to-date losses and now sits just 3.7% below its February intra-day high. This swift five-week recovery—among the fastest since the late 1980s—points to a classic event-driven bear market. Recent data supports this rebound: Q1 earnings, non-farm payrolls, retail sales, and inflation figures have consistently exceeded expectations. This momentum suggests the uptrend may continue, providing breathing room for markets and policymakers to finalize key deals, potentially lifting economic expectations further.
Q1 Report Card: Strong Earnings, Aggressive Buybacks
Corporate America delivered robust Q1 results, with 4% revenue growth and 12% earnings per share growth year-over-year. While U.S. exceptionalism may face headwinds, earnings haven’t yet reflected a slowdown. Companies seized April’s sell-off as a buying opportunity, with corporate stock buybacks totaling $234 billion — the second-highest monthly figure on record, just shy of April 2022’s $243 billion. Buyback demand is projected to continue at $4 billion daily through mid-June, providing a tailwind for stock prices.
Active Managers Regain Confidence
The National Association of Active Investment Managers (NAAIM) Exposure Index has rebounded from mid-April lows to its five-year average of 71, matching late February levels. While not predictive, this recovery signals active managers see a favorable risk/reward environment. Sentiment is clearly on the mend, aligning with improving market technicals and fundamentals. The Delta MSI is bullish again too.
The Underappreciated U.S. Economy
Despite policy noise and tariff volatility, the U.S. economy remains resilient. Job creation is steady, consumer demand holds firm, and business investment shows no significant cracks. This strength, paired with overly bearish sentiment, sets the stage for potential upside surprises.
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 rose +2.93% while the Nasdaq 100 (QQQ) added +3.44%. Small cap stocks joined the upswing with a +3.28% gain.
Warm wishes and until next week.