Fearing Worse Than Stagflation
May 1, 2025 (Investorideas.com Newswire) S&P 500 broke below 5,515 on poor ADP employment change and advance GDP coupled with price beat. That says it all, and while stocks somehow shook off SMCI miss, the plunge in yields especially on the short end, has gotten more good confirmation in the data just in, that's what I talked about hard data catching up to (poor) soft data around the weekend. It's also seen in silver and copper - kind of mirroring UBS economic expectations a couple of hours ago from Switzerland... all talked in today's video.
DAX is also confirming today's cautious turn - tariffs are biting, and today represents fear of US recession striking, maybe for the first time seriously as latest earnings hadn't summarily sold (even if not too good)... this ay start to change as today's data had been really bad. So which level will hold, where can some intraday bounce develop?
Nasdaq 100 Awaits Key Earnings
The tech sector is consolidating ahead of crucial earnings reports that could set the tone for market direction. Executives from major tech companies will likely address their AI investments and potential impacts from Trump policies. Investors are particularly focused on guidance regarding the effects of tariff developments on future business plans.
Microsoft and Meta will report today after market close, with Amazon and Apple scheduled tomorrow. These "Magnificent Seven" stocks have been key market drivers in recent years, though they have largely underperformed so far in 2025.
Potential resistance for the Nasdaq 100 is around 19,700, marked by the previous local high, while support is at 19,000-19,200.
VIX: Lower Again
The volatility index has been stabilizing at lower levels, suggesting some growing investor confidence despite concerns about trade policies and economic growth. Yesterday, the VIX was as low as 23.76.
Historically, a dropping VIX indicates less fear in the market, and rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market's downward reversal. Conversely, the higher the VIX, the higher the probability of the market's upward reversal.
S&P 500 Futures Contract: Pointing Lower
This morning, the S&P 500 futures contract is trading lower, pulling back from its recent highs near the 5,600 level. The support level is around 5,400, marked by some recent lows. The market is taking a breather after weak economic data.
Conclusion
The S&P 500 is likely to correct some of its recent advance following worse-than-expected economic data. It's expected to open 1.4% lower, pulling back below the 5,500 level. For now, it appears to be just a correction of the uptrend.
Last week, the market advanced on several positive catalysts, including easing tariff fears, potential peace developments in Ukraine, and anticipated quarterly earnings releases. That said, it remains uncertain whether this is a new uptrend or merely a correction within the downtrend.
Here's the breakdown:
- S&P 500 closed 0.58% higher on Tuesday, but today, it is poised to open much lower following weak economic data.
- The market is awaiting earnings releases from Microsoft and Meta today after the session closes.
- Trade policy developments remain in focus.
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Paul Rejczak
Stock Trading Strategist
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