Markets at a Crossroads: Optimism Builds, But Risks Remain

Markets continue to navigate a complex landscape of policy shifts, mixed economic data, and sector-driven volatility. Optimism over easing trade tensions and potential Fed rate cuts has helped lift equities, with the S&P 500 maintaining upward momentum after a sharp April selloff. While defensive names and select tech stocks have supported the rally, caution lingers amid weak retail data, falling producer prices, and company-specific headlines—from Nvidia’s rebound to UnitedHealth’s regulatory woes. As macro uncertainty persists, investor focus remains split between growth potential and policy risk, setting the stage for a cautiously optimistic outlook.

Markets Juggle Gains and Losses as Economic Uncertainty Lingers

US stocks ended mixed on Thursday, May 15, as optimism over potential trade deals offset sector-specific declines. The S&P 500 rose 0.34%, continuing its recovery from April’s tariff-driven selloff, while the Nasdaq dipped 0.02%.

Cisco Systems surged nearly 6% after raising its forecast, supported by AI demand. In contrast, UnitedHealth plunged 13% to a five-year low after reports of a criminal investigation into alleged Medicare fraud, dragging down peers like Humana and Molina.

Walmart slipped 1% after warning of price hikes due to tariffs, while Amazon lost 2.6%. Broader market sentiment was lifted by hopes of tariff rollbacks, though weaker retail sales and falling producer prices highlighted ongoing economic uncertainty.

Dollar Dips as Data Reveals Cracks in US Consumer Strength

The US dollar edged lower on Thursday, pressured by softer-than-expected retail sales and falling producer prices in April. Retail sales rose just 0.1%, signaling cooling consumer momentum, while the Producer Price Index dropped 0.5%, reflecting weaker demand in services like travel.

Despite a brief rally earlier in the week driven by easing U.S.-China trade tensions, the dollar index fell 0.11% to 100.89. The data, combined with ongoing policy uncertainty and cautious Fed commentary, has tempered expectations for near-term rate cuts, now seen likely starting in September.

S&P 500: Technical Rebound Signals Constructive Bias, With Caution on Divergence

Following a sustained decline that culminated in a trough at 4,800.73 on April 7, the S&P 500 has staged an impressive rebound, advancing more than 23% in the weeks since. This recovery appears to be underpinned by a combination of technical breakouts and improving investor sentiment.

Technically, the index has confirmed a bottom failure swing—evidenced by the higher low at 5,100.90 and a subsequent breakout above the prior peak at 5,492.67. This sequence effectively terminated the previous downtrend and signaled a shift toward a more bullish phase.

The index now trades comfortably above both the 20-period and 50-period Exponential Moving Averages (EMAs), underscoring positive momentum. The recent formation of a Golden Cross—where the 20-period EMA crosses above the 50-period EMA—further validates the bullish outlook.

Momentum indicators also support this view. The Momentum Oscillator remains above the 100 baseline, reflecting persistent upside pressure, while the Relative Strength Index (RSI) continues to hold above the neutral 50 mark, indicating sustained buying interest.

That said, a near-term note of caution is warranted. A negative divergence has emerged between the Momentum Oscillator and price action, suggesting a potential deceleration in bullish momentum and warranting close monitoring.

Should the current technical structure remain intact, the next upside targets are seen at 6,125.55, followed by 6,518.32 and 6,760.44. On the downside, key support levels to monitor include 5,700.35, 5,492.67, and the breakout low of 5,100.90.

In summary, while the broader technical picture remains constructive, the presence of divergence and headline-driven macro risks, particularly around trade policy, suggests a cautiously bullish near-term bias. Sustained strength above key support levels would reinforce the prevailing uptrend unless disrupted by shifts in sentiment or policy direction.

Stocks Climb as Rate-Cut Bets Fuel Market Rebound

US stocks rose on Thursday, with the S&P 500 gaining 0.4% as weak economic data fueled expectations of two Fed rate cuts this year, sending Treasury yields sharply lower. Producer prices saw their biggest drop in five years, retail sales slowed, and factory output contracted, reinforcing the case for policy easing.

While defensive stocks outperformed, tech names were mixed—Meta fell on AI delays, while Applied Materials offered a cautious forecast. The dollar weakened, and oil prices dipped amid signs of progress in U.S.-Iran nuclear talks. Despite uncertainty around tariffs and growth, investor sentiment is improving, with major indexes nearing record highs.

Nvidia’s Comeback: $4 Trillion Within Reach?

After a sharp selloff driven by U.S.-China trade tensions and a $5.5 billion writedown, Nvidia has bounced back and reentered the $3 trillion market cap club alongside Apple and Microsoft. The rebound came as tariff fears eased, with the Trump administration signaling a pause and potential reductions.

Now, attention turns to whether Nvidia could become the first $4 trillion company. With faster earnings growth than Apple and Microsoft and a slightly lower valuation, Nvidia appears well-positioned. However, ongoing trade risks and potential AI investment slowdowns could delay that milestone. Still, many analysts see Nvidia as the leading contender in the $4 trillion race.

Conclusion

As markets digest a mix of encouraging and cautionary signals, the path forward remains nuanced. While easing trade tensions and rising Fed rate-cut expectations have lifted equities and supported a broad risk-on sentiment, weaker economic data and persistent policy uncertainty continue to cloud the outlook. Technical indicators point to a constructive bias, particularly for the S&P 500, yet divergences and sector-specific headwinds suggest that momentum may be uneven. In the near term, markets appear poised to advance—albeit cautiously—pending further clarity on macroeconomic conditions and geopolitical developments.