Stock Market Update Tuesday April 22, 2025

Stock Market Update Tuesday April 22, 2025 Markets Rebound Sharply on Hopes of Trade Reconciliation U.S. equities staged a robust rally on Tuesday, buoyed by renewed optimism around potential trade de-escalation. Headlines suggesting progress in negotiations spurred risk appetite, with the S&P 500 surging 2.6%, trimming its year-to-date decline to under 10%. The broad-based rebound reflected a shift in investor sentiment, with cyclical sectors and high-beta names leading the charge.

Away From Stocks: In fixed income, price action was comparatively subdued. The 30-year Treasury yield eased three basis points to 4.88%, while the 2-year yield ticked slightly higher to 3.76%, reflecting modest curve flattening amid tempered Fed expectations. Commodities presented a mixed picture. WTI crude extended gains, advancing toward $64 per barrel, underpinned by ongoing supply-side concerns and hopes of improved global demand. Gold prices, which spiked to $3,500 per ounce during overnight trading, retrenched to $3,381, as risk-on sentiment drew flows out of safe-haven assets. Meanwhile, Bitcoin continued its parabolic ascent, holding firm around $91,000, maintaining its momentum as a speculative favorite. Volatility eased as the VIX index dipped below 31, suggesting improved investor confidence and reduced demand for downside protection.

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A key overhang continues to be the trajectory of U.S. trade policy—specifically, how the White House intends to navigate ongoing negotiations and what it will ultimately define as a “win.” The policy direction appears to hinge on a single individual’s decision in the coming week, which only amplifies the sense of unpredictability.

Encouragingly, Vice President Pence and Indian Prime Minister Modi jointly announced a framework for a U.S.–India trade agreement, citing meaningful progress in bilateral discussions. The language used was notably constructive, indicating a firm commitment to reaching a deal. This news appeared to provide a tailwind into the close, helping equities recover from intraday losses.

India’s active participation in trade talks, even amid cautionary signals from China, is notable. While China remains the world’s second-largest economy, India’s GDP is comparable to Japan’s and exceeds that of many European economies—positioning it as a strategically important player in the global economic order.

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On Monday, markets reacted sharply to renewed rhetoric from President Trump regarding the removal of Federal Reserve Chair Jerome Powell. Amplified via social media, the President’s criticism centered on the Fed being “behind the curve” and floated the idea of preemptive rate cuts. Reports have also surfaced that the administration is assessing legal and procedural avenues for Powell’s dismissal, possibly through the involvement of National Economic Council Director Kevin Bassett.

Markets have taken these developments seriously, contributing to the sell-off observed yesterday. Nonetheless, we view the prospect of Powell’s removal as unlikely—not due to a shift in the President’s policy stance, but rather due to concerns that such an action could trigger further equity market deterioration, which the administration is keen to avoid. Removing the Fed Chair would likely erode investor confidence and eliminate a convenient scapegoat should market conditions worsen. In short, undermining the independence of the Federal Reserve would be a profound policy misstep. While one can debate the merits of specific monetary policy decisions, the credibility of the institution is foundational to financial market stability. This comes at a time when recent trade actions have already injected substantial volatility into the economic operating environment. The abrupt and poorly coordinated policy shifts have left corporations ill-prepared to adjust.

Importantly, we do not interpret recent developments as indicative of an impending recession. The high-yield credit markets, often a leading indicator of stress, have not confirmed a recessionary signal. In fact, credit spreads have narrowed by approximately 50 basis points, suggesting a degree of underlying resilience in the risk markets.

Still, equities remain vulnerable to policy-driven catalysts. The potential for a positive inflection—such as the announcement of a credible and enforceable trade agreement—could drive a re-rating of risk assets. There were reports last week indicating that several trade deals are currently in development. That said, Japan has signaled it will not be pressured into a rushed agreement, while China has emphasized it will not accept any arrangement that compromises its strategic interests.

It’s worth recalling that during a prior period of market fragility in early April, the administration initiated a 90-day pause on select trade measures. That move resulted in a ~10% rally in the S&P 500 and a 15-point decline in the VIX. A similar gesture of de-escalation in the near term could have a materially positive impact on investor sentiment.

For now, the market remains range-bound, constrained by a series of macro risks: potential escalation of U.S.–China tensions into a prolonged economic conflict, rising inflation expectations, downward revisions to corporate earnings, and the looming specter of global deleveraging. Until clarity emerges on these fronts, volatility is likely to remain elevated.

Bottom Line:

Tomorrow, Wednesday April 23, 2025, brings several key data points, but the spotlight is likely to be on Treasury Secretary Besant’s remarks at the IIF. Markets will be watching closely, especially after his closed-door meeting earlier today with JPMorgan clients. Some of his comments sparked optimism, particularly around U.S.-China trade relations.

He emphasized the need for de-escalation, noting that the administration is not aiming for a full decoupling from China. While he indicated that a comprehensive trade agreement may still be two to three years away, the tone was constructive. Mixed reports followed, but the White House reinforced that progress is being made. They're engaging with 34 countries this week, and the President has stated talks with China are “going well.”

Recession fears are understandably rising, but there’s a disconnect: high yield credit isn’t signaling stress. Spreads have tightened since April 7, which typically doesn’t happen if recession risk is front and center.

But remember: on April 9, when President Trump announced a 90-day tariff pause, the S&P jumped 2%. That kind of upside tail risk remains in play. Tesla reported after the bell—while they missed on numbers, the stock is trading slightly higher, suggesting some exhaustion on the downside.

We are not attempting to call the bottom or time the market. Long positions will only be initiated upon confirmation from our proprietary buy signal. Our proprietary trading algorithm has triggered sell signals across all five major U.S. equity benchmarks: SPY, RSP, QQQ, IWM, and DIA ETFs. The corresponding signal dates are detailed below and visualized on the accompanying charts. Given the elevated uncertainty and lack of a confirmed buy signal from our proprietary algorithm, we strongly advise against initiating new long positions or adding exposure at this time. Once our algorithm generates a buy confirmation, we will look to reallocate capital into existing or new sector-specific positions accordingly. March 19, 2025 Algorithmic Sell Signals & Market Trends March 3, 2025 – Sell alert triggered for S&P 500 Equal Weight RSP ETF, bringing the total to five major indexes on sell alerts. February 24, 2025 – Sell signal issued for Russell 2000 IWM ETF, confirmed by a prior weekly chart sell alert on February 21. February 24, 2025 – Dow Jones Industrial Average ETF (DIA) moved to sell condition. W.D. Gann Cycle Pivot Date for the S&P 500 (SPX) on Saturday, April 5, 2025. Historically, these cycle dates often coincide with significant inflection points in price action. While the market will be closed on Saturday, we will be watching for a potential pivot either into Friday’s close or by Monday’s session.