Stocks rally as calm returns

[WORLD] Stocks surged last week, marking the most robust rally since early 2025, as investor sentiment improved following signals of easing trade tensions and reassurances regarding Federal Reserve leadership. With major indices regaining ground lost to tariff-related volatility, market participants are now eyeing key economic data and corporate earnings for further direction.

Market Recap: A Rally Fueled by Reassurance

The S&P 500 climbed approximately 4.5% over the past week, the Dow Jones Industrial Average rose by 2%, and the Nasdaq Composite led with a 6.6% jump, buoyed by strong performances in technology stocks. This rally came on the heels of President Trump’s remarks indicating a willingness to reduce the recently imposed 145% tariffs on Chinese imports and a public commitment to retain Federal Reserve Chair Jerome Powell, moves that collectively eased two of the market’s biggest anxieties.

“Just the awareness of a shift in approach, that the administration is ready to scale back, is encouraging,” said Mark Newton, Fundstrat’s global head of technical strategy.

The positive momentum pushed the S&P 500 past the key 5,500 mark in early trading sessions, although this level remains a significant technical barrier. The Nasdaq’s gains were propelled by heavyweights in the tech sector, with companies like Nvidia, Amazon, and Tesla among the most actively purchased stocks.

In particular, the tech sector has been at the forefront of the market's rally, with large-cap companies continuing to outperform. Analysts point to the resilience of these companies, which have adapted to the changing landscape by diversifying their global supply chains and investing heavily in AI, cloud computing, and renewable energy. These innovations are not only helping these tech giants weather economic volatility but are positioning them for growth in the longer term.

Investor Behavior: Calm Amid Volatility

Despite sharp swings earlier in April, data from major investment firms suggest that most individual investors remained composed. Vanguard reported that only 8.4% of its self-directed clients traded during the period of heightened volatility, with buyers outnumbering sellers by nearly five to one. Similarly, BlackRock observed that investors were more focused on identifying buying opportunities rather than panic-selling.

“A significant majority of our self-directed investors maintained their positions,” noted Jamesielli, head of trading at Vanguard.

This measured approach by investors contrasts with earlier periods of heightened uncertainty, where market participants were more prone to reactive behavior. Experts attribute this calm to a broader understanding that market cycles include both ups and downs, with a growing emphasis on long-term investing strategies rather than short-term volatility. The trend reflects a shift in investor psychology towards resilience, possibly a result of the lessons learned during past financial crises.

Economic Outlook: Eyes on Growth and Inflation

While the rally has restored confidence, underlying economic concerns persist. Economists forecast that first-quarter U.S. GDP growth will slow dramatically to an annualized rate of just 0.1%, a marked drop from 2.4% in the previous quarter. The upcoming April jobs report and inflation data are expected to provide further clarity on the health of the economy.

Market strategists caution that, despite the rebound, the effects of tariffs and slowing growth are not fully behind investors. Michael Kantrowitz, chief investment strategist at Piper Sandler, emphasized that “market corrections tend to stabilize as the primary issues begin to ‘heal,’” but warned that challenges remain.

Recent developments in the labor market, especially within the manufacturing and service sectors, will also play a critical role in shaping the outlook. While some regions of the country have experienced job losses, others have shown signs of resilience. A more nuanced picture of the job market will likely emerge with the release of the April jobs report, which could provide more insights into whether the economy is truly slowing or if there are pockets of growth yet to be fully realized.

Corporate Earnings: Tech Leads, Broader Market Watches

This week, 180 companies in the S&P 500, including Amazon, Meta, Microsoft, and Chevron, are set to report quarterly earnings. The focus will be on whether corporate profits can withstand the dual pressures of tariffs and slowing economic growth. Technology and consumer discretionary sectors have so far outperformed, while broader market breadth remains mixed.

Technical Signals: Bullish Indicators Emerge

A notable technical milestone was reached last week with the completion of a Zweig Breadth Thrust (ZBT) on the NYSE, a rare indicator historically associated with sustained market advances. According to Ryan Detrick, chief market strategist at Carson Group, the ZBT has been “100% accurate since WWII, with the S&P 500 higher 6- and 12-months later every single time”.

Risks and Cautions: Not Out of the Woods

While optimism has returned, analysts warn that further gains may depend on concrete progress in trade negotiations and evidence of economic stabilization. UBS analysts noted that, despite the rally, valuations may still face pressure if tariffs persist or if economic growth underperforms expectations. The market could remain rangebound, with periodic volatility, as investors await more definitive resolutions to trade and policy uncertainties.

Moreover, the ongoing concerns surrounding the global supply chain are likely to remain a risk factor for the economy. Although some of the initial disruptions from trade tensions have been addressed, the long-term effects on production and transportation costs remain a source of concern. For industries such as retail, manufacturing, and logistics, these supply chain issues could continue to dampen economic recovery and affect corporate bottom lines.

Outlook: Cautious Optimism Prevails

Key economic data: Investors are awaiting the April jobs report and Q1 GDP figures for signs of economic resilience.

Corporate earnings: Results from major tech and consumer companies could set the tone for the next phase of the rally.

Trade policy: Any concrete developments in U.S.-China negotiations will be closely watched for their market impact.

As market volatility subsides and optimism returns, investors remain vigilant, balancing hopes for continued gains against the backdrop of unresolved economic and geopolitical risks.