empty
13.03.2025 10:53 AM
Wall Street gets rid of dead weight

Buying US stocks is like catching falling knives. It's unpleasant and dangerous for your life — or rather, for your wallet. Nevertheless, pessimism regarding US stock indices has reached such a level that you can't help but start looking at long positions in the S&P 500. When everyone is selling, a wise investor grabs the right moment to buy, doesn't he?

It seemed that US inflation data should have helped the broad stock index find a bottom. Consumer prices and the core indicator increased by a modest 0.2% month-on-month in February. Year-on-year, both indicators fell short of forecasts. Their dynamics signal that the disinflationary trend remains strong, which theoretically should encourage the Federal Reserve to resume the cycle of rate cuts and throw a lifeline to the S&P 500.

US inflation dynamics

This image is no longer relevant

In reality, inflation doesn't interest anyone. Investors react to tariff news and get spooked by the so-called looming recession. But what if there isn't one? According to JP Morgan, signals from the credit markets, which have repeatedly proven their validity in recent years, suggest that the chances of a downturn in the US economy in the next 12 months are 9-12%. At the same time, stock and interest rate markets estimate these chances at nearly 50%. Based on this, JP Morgan concludes that the correction in the S&P 500 is nearing its end.

Quite an interesting opinion. The broad stock index has fallen almost 9% from its record high. And while the start of the downtrend was caused by overconfidence, which manifested in narrow trading ranges, the subsequent slump had a different character. Investors who went long at high levels hastily liquidated their positions, which widened the daily trading ranges. Gradually, the situation stabilized and the S&P 500 shed ballast.

S&P 500 daily trading range dynamics

This image is no longer relevant

Has the short-term pain for US stocks and the economy, as mentioned by Donald Trump, ended? He said we need to endure to make America great again. I don't think so. Trade wars are just beginning, and they will undoubtedly harm economic growth and spur inflation in the US. A stagflation scenario is not the best option for the S&P 500.

This image is no longer relevant

On the other hand, in the short term, excessive pessimism could play a nasty trick on the "bears" in the broad stock index. A retreat from recession fears could encourage growth in the S&P 500. However, the rally potential in the stock market seems limited.

Technically, on the daily chart of the S&P 500, the "bulls" attempted a counterattack. However, the first assault on the resistance in the form of a pivot level at 5,627 was unsuccessful. A repeat attempt, if successful, will enable traders to open short-term long positions. The future of the broad stock index will depend on its ability to break above the previously indicated resistances at 5,670 and 5,750.

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

EUR/USD: Analysis and Forecast

The EUR/USD pair is attracting buyers today, breaking a three-day losing streak and attempting to build intraday momentum above the psychological 1.1300 level. This indicates a renewed interest from buyers

Irina Yanina 11:59 2025-05-02 UTC+2

U.S. Labor Market Data Could Be a Major Disappointment

Employment growth in the U.S. likely slowed in April, although the unemployment rate is expected to remain unchanged, pointing to healthy but moderate demand for labor. However, the Trump administration's

Jakub Novak 10:08 2025-05-02 UTC+2

The ECB Has No Other Choice

The European currency continues to lose ground against the U.S. dollar as traders increasingly place bets on the European Central Bank's upcoming monetary policy decisions. According to data, the chances

Jakub Novak 10:03 2025-05-02 UTC+2

China Has Finally Responded

The euro, the pound, and other risk assets reacted with gains following statements from Chinese authorities that they are assessing the possibility of trade negotiations with the United States—marking

Jakub Novak 09:57 2025-05-02 UTC+2

The Process Has Begun. China Is Ready for Trade Talks (There's a Chance of Renewed Decline in Gold and EUR/USD Prices)

Trading on the last day of the week is unfolding positively. News that China is ready to begin negotiations has inspired investors to buy risk assets and weakened the U.S

Pati Gani 09:43 2025-05-02 UTC+2

The Market Enters Turbulent Waters

The market is confident that tariffs won't materialize or that companies can pass them on to customers. The S&P 500's eight-day rally—its longest since August—strongly hints at this. So does

Marek Petkovich 09:24 2025-05-02 UTC+2

What to Pay Attention to on May 2? A Breakdown of Fundamental Events for Beginners

Only a few macroeconomic events are scheduled for Friday, but some are quite significant. Naturally, the focus is on the U.S. NonFarm Payrolls and unemployment rate, yet it's also important

Paolo Greco 09:14 2025-05-02 UTC+2

GBP/USD Overview – May 2: The U.S. Dollar Didn't Rise for Long

On Thursday, the GBP/USD currency pair continued to decline. The dollar had strengthened for three consecutive days—despite having no objective reason. U.S. macroeconomic data has been consistently weak; there were

Paolo Greco 03:50 2025-05-02 UTC+2

EUR/USD Overview – May 2: The Dollar Faces a New Collapse – And It's Far from the Last

On Thursday, the EUR/USD currency pair once again traded relatively calmly, but the U.S. dollar failed to show any meaningful growth this time. A little bit of good news goes

Paolo Greco 03:47 2025-05-02 UTC+2

USD/JPY: A Rough Patch for the Yen

At its latest meeting, the Bank of Japan kept all key policy settings unchanged, effectively implementing the most expected baseline scenario—despite earlier conflicting statements from central bank officials

Irina Manzenko 01:19 2025-05-02 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.