The recent market turbulence has been a cause for concern among investors, as the Federal Reserve’s hawkish stance for 2025 has triggered a significant selloff. With only two small rate cuts totaling 0.5% planned for the year, fears of stagflation are on the rise. While some are hopeful that the excitement surrounding AI may offset these worries, the recent surge in risk-taking could be losing steam.
Yesterday saw the S&P 500 plummet nearly 3%, its largest one-day drop since August. On the flip side, the Nasdaq soared by 74%, marking its second-largest daily jump in history. However, this surge has raised questions about a potential bubble, especially as Tech and AI stocks continue to drive the index higher.
Wall Street Recovery Faces Hurdles
Today, Wall Street indexes are struggling to recover, facing renewed selling pressure amidst concerns over rising US Treasury Yields in 2025. The S&P 500 is currently trading at 22 times earnings expectations for the next 12 months, well above its long-term average. Despite these challenges, optimism surrounding the incoming Trump administration may help limit further losses.
Looking ahead, there is a growing belief that US stocks could take cues from the bond markets as we move into the new year.
Technical Analysis
S&P 500
From a technical perspective, the S&P 500 has broken bullish structure on a daily timeframe, with a candle close below the previous swing low. Today’s rally faced resistance before retracing back to trade almost flat. The daily close will be crucial in providing insights into the index’s next move.
- A daily close above a certain level could signal further upside, but keep an eye on US yields.
- Conversely, a daily close below another level could indicate more downside, with a retest of the 100-day MA as a possibility.
Source: TradingView
Support: Original Post
By analyzing the current market trends and technical indicators, investors can gain valuable insights into potential opportunities and risks in the financial landscape. Staying informed and proactive in response to changing market conditions is crucial for securing a stable financial future.