US stock indices closed lower across the board last night, taking a violent lurch lower after the release of minutes from the last Federal Reserve monetary policy meeting. These were considered more hawkish than expected, with FOMC members warning that inflation risks could persist longer than previously forecast.
There were additional concerns over the economic drag from President Trump’s proposed reciprocal tariffs. Put together, the minutes made it less likely that the US central bank will resume its rate cutting anytime soon. But all the major US stock indices shot higher after the close.
NVIDIA delivered a strong set of earnings and rose around 5% in extended trade, providing a welcome boost to the tech sector. The bulls got another boost after the US Court of International Trade ruled that President Trump had overstepped his authority when he imposed his “reciprocal” tariffs.
The three judges blocked Mr Trump’s tariff package, instantly lifting US stock index futures well over 1% apiece. This after-hours rally reflected a swift change in sentiment as traders welcomed the prospect of reduced trade headwinds.
The Trump administration is expected to challenge the decision. This morning’s rally across US stock index futures saw the S&P 500 recapture levels last seen before Moody’s US downgrade just under a fortnight ago.
Chart-wise, all the US majors are looking healthier than they were a week ago, and risk appetite seems to have returned. Despite this, the respective MACDs still show that the indices went from being very oversold in early April to overbought now.
Source: TN Trader
That doesn’t mean that they can’t rally further, nor does it mean that they are about to slump. After all, this overbought condition can be worked off through a protracted period of rangebound, sideways consolidation. Once done, that would help reset the MACDs at more neutral levels, and thereby provide room for another push higher. But investors should take care.
Markets are extremely skittish at present and capable of big moves in both directions, as demonstrated by the overnight rally. This is not the slow and steady bull market that ran for around 15 months from the October 2022 low. We’re now operating under ‘Trump Rules’ with all the unpredictability that these bring. Trade accordingly.
