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

XAU/USD. Analysis and Forecast

Gold is declining below the $3300 level today. U.S. PCE data met expectations. A shift in trade flows is helping the U.S. dollar regain positive momentum. This is also undermining

Irina Yanina 17:37 2025-05-30 UTC+2

Inflation Is Almost Under Control

While the euro continues to hold its ground against the dollar, European Central Bank (ECB) Governing Council member Fabio Panetta indicated during an interview today that inflation in the eurozone

Jakub Novak 13:40 2025-05-30 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair is attempting to regain positive momentum today, though traders remain cautious ahead of the key U.S. Personal Consumption Expenditures (PCE) Price Index release. As a preferred inflation

Irina Yanina 13:22 2025-05-30 UTC+2

EUR/USD. Analysis and Forecast

The EUR/USD pair continues to struggle to recover after rebounding from the 1.1200 level reached earlier, showing a moderately negative bias, although the decline remains limited. The U.S. dollar

Irina Yanina 13:19 2025-05-30 UTC+2

Legal Disputes Between Trump and Companies Over Tariffs Will Negatively Impact Markets (There Is a Likelihood of Continued Decline in Bitcoin and Litecoin Prices)

Global markets are significantly influenced by events occurring in the United States, where both political and economic spheres continue to swing like a pendulum. Earlier this week, after the U.S

Pati Gani 11:11 2025-05-30 UTC+2

More Time is Needed

Dallas Federal Reserve Bank President Lorie Logan indicated yesterday that it might take some time before policymakers understand how the economy will react to tariffs and other policy changes

Jakub Novak 10:53 2025-05-30 UTC+2

The ECB Should Not Delay Rate Cuts

While the euro is trying to regain its monthly highs after a fairly significant correction seen this week, a survey of several economists shows that the European Central Bank

Jakub Novak 10:49 2025-05-30 UTC+2

Markets Demand an Appeal

The S&P 500 started the day strong but ended on a downbeat note. Initially buoyed by the U.S. Court of International Trade's ruling that the White House's tariffs were illegal

Marek Petkovich 10:33 2025-05-30 UTC+2

What to Pay Attention to on May 30? A Breakdown of Fundamental Events for Beginners

Several macroeconomic reports are set to be released on Friday, but none are deemed particularly significant. In Germany, the inflation report for May will be released, with expectations

Paolo Greco 06:51 2025-05-30 UTC+2

GBP/USD Overview – May 30: Justice Has Prevailed, but for How Long?

The GBP/USD currency pair closed below the moving average line on Thursday, and the dollar strengthened for three consecutive days. However, everything changed in the second half

Paolo Greco 03:51 2025-05-30 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.