Last week, the S&P500 index rebounded, ending a three-week decline, but analysts caution that declaring a bottom is premature. Despite this uptick, U.S. bonds and the dollar faced significant sell-offs, reflecting broader concerns about U.S. economic risks. As the market navigates these turbulent waters, experts are wary of a potential "rapid decline" in the S&P500's recovery, predicting a weekly range of 5,000 to 5,700 points.
On April 11, 2025, the U.S. 10-year Treasury yield surged to 4.58%, while the 20-year and 30-year bonds reached 5% on April 9. These movements are indicative of a market grappling with fears of stagflation, exacerbated by tariffs imposed during President Trump's administration. The heightened anxiety surrounding U.S. economic stability has led to the sell-off of safe-haven assets like U.S. Treasury bonds, which typically see increased demand during economic uncertainty.
According to Bloomberg, the recent fluctuations in U.S. bonds have been attributed to various factors, including derivative trading and speculative selling by overseas hedge funds. Notably, as of January 2025, China held $760.8 billion in U.S. Treasury bonds, a slight increase from December's $759 billion. However, since 2014, China's holdings have gradually declined, and recent reports indicate that China did not participate in the Treasury auctions for three-year and ten-year bonds on April 8 and 9, respectively. This absence raises questions about the potential for China to leverage its U.S. bond holdings amid escalating trade tensions and inflation concerns.
In the context of these developments, the MOVE index, which measures bond market volatility, rose to 139.88 on April 8, nearing levels last seen in October 2023. This uptick suggests growing market anxiety over U.S. bond volatility, a sentiment echoed by analysts who warn of the potential for continued instability in the bond market.
Meanwhile, spot gold prices reached a record high of $3,200 last week, a notable increase given that rising U.S. interest rates typically dampen gold prices. The current gold surge indicates a shift in perception, as U.S. Treasuries are increasingly viewed as risk assets rather than safe havens.
Market dynamics have also influenced expectations regarding U.S. monetary policy. As of April 11, the projected level of the federal funds rate at the end of December 2025 has dropped to around 3.57%, down from a temporary low of 3.26% on April 8. This shift reflects growing anticipation of potential rate cuts, with the Federal Open Market Committee (FOMC) having met on March 18-19 to discuss monetary policy adjustments. Chairman Jerome Powell has indicated a cautious approach, emphasizing the need to assess the long-term impacts of Trump's tariffs on the economy.
As the earnings season unfolds, analysts are closely monitoring the performance of major companies. Last week's rebound in U.S. stocks was partly fueled by strong earnings from JP Morgan Chase (JPM), and upcoming earnings reports from firms such as Goldman Sachs (GS) and Citigroup (C) are expected to further influence market sentiment. Investors are particularly focused on guidance regarding future performance, as optimistic projections could alleviate some of the prevailing anxiety.
The retail sales figures for March are also anticipated to provide insight into consumer spending trends, with Bloomberg's projections suggesting robust growth. However, any deviation from these expectations could amplify concerns about stagflation, potentially weighing on the stock market.
Technical analysis reveals that the S&P500 faces resistance at key levels of 5,700, 5,646, 5,500, and 5,400 points. Conversely, support is expected around 5,265, 5,168, 5,091, and 5,000 points. The interplay between these resistance and support levels will be crucial as the market navigates the current volatility.
In summary, while the S&P500's recent rebound offers a glimmer of hope, the underlying economic conditions suggest that caution is warranted. As the market braces for potential fluctuations driven by earnings reports and economic indicators, investors must remain vigilant in assessing the evolving landscape of U.S. financial markets.
