Uncertainty around the stock market is fading as evidenced by the chart below of the S&P 500. Although rare, it is possible we have a ‘V’ bottom in place which would mean new all-time highs in the coming weeks.
Some of the technical indicators in the chart above also show that the S&P is rebounding off a rare oversold reading on the RSI (Relative Strength Index) and we are seeing the MACD momentum indicator beginning to turn higher.
Notable is that this plunge found support at a previous high from 2022 at 4824 (and the 50% re-tracement level). This is good to see as it demonstrates this area of the chart has strong support from buyers.
Volatility is Crashing
One notable is that volatility is coming down substantially after spiking to a level only seen during the COVID crash and the 2008 financial crisis.
The VIX Volatility Index shows how sharp the spike was where readings above 30 warn of significant declines. At 60, that implies a normalized one-day move in stocks is 3.75% so there was definitely a panic feel to the plunge last month.
If we can see this index drop below 20 and move closer to 15 then we are likely back to a trending market and new highs.
The Economy Is OK
On Wednesday we got a negative print for Real Q1 GDP of 0.3% which has markets concerned about a recession. However, this may be a one-time shock as many companies pulled forward imports to avoid the potential for any tariffs later in 2025. Was this overdone or a prescient move by US corporations?
As you can see in the formula below for GDP, on the far right imports are subtracted from the calculation and that hurt the results for Q1. However, trade numbers should come to a new normal once terms are finalized for international trade.
This week, we did hear from the administration that China is now engaging on discussions as well as India and other Asian countries. Europe may take longer given the complexity of trade networks among member nations.
There were a few bright spots this week in the economic data:
April Jobs Report:The U.S. economy added 177,000 jobs, surpassing expectations of 130,000, with the unemployment rate steady at 4.2%. Despite revisions lowering prior months’ job gains by 58,000, the report signaled labor market resilience amid tariff uncertainties.
Durable Goods and Factory Orders: Durable goods orders rose 9.2% in March, driven by a 27.0% surge in transportation equipment, though non-transportation orders were flat. Factory orders increased 4.3%, below the 4.5% estimate, with ex-transportation orders down 0.2%, reflecting uneven manufacturing momentum.
Corporate Earnings: Strong earnings from tech giants fueled market gains. Microsoft and Meta reported results exceeding expectations, boosting AI-related stocks like Nvidia and Broadcom. Apple’s revenue grew 5% YoY to $95.4 billion, with a $100 billion share buyback announced. Amazon’s earnings beat estimates, but its guidance disappointed, leading to a 2% after-hours drop.
Next week the earnings reports will continue but we have a Fed meeting on Wednesday. Will the negative GDP report give the Fed cover to make a 25bp rate cut?
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President, Kisco Capital
