U.S. equity markets ended their nine-day winning streak on Monday, with major indices retreating and gold prices rallying sharply—a clear sign of renewed risk aversion. Investors are increasingly cautious ahead of this week’s Federal Reserve policy meeting and lingering uncertainty around U.S.-China trade relations.
Trade Tensions Resurface, Weighing on Market Sentiment
Market confidence was rattled after former President Trump proposed a 100% tariff on foreign films—a move that hit entertainment stocks such as Netflix and Paramount Global. While the proposal may have limited direct economic impact, it reignited broader concerns about the possibility of a more aggressive tariff stance, dampening hopes for a more measured trade policy.
U.S. Treasury Secretary Scott Bessent noted that 17 countries have submitted favorable trade proposals, suggesting some progress in trade discussions with China. However, tangible developments remain elusive. High tariffs and deep-seated distrust between the two nations continue to pose significant hurdles to any meaningful breakthrough.
Equity Indices Pull Back Near Key Resistance
The S&P 500 (SPX500) slipped after approaching the key 5,700 resistance level, effectively halting its nine-session rally—an area we flagged in previous technical commentary. The NAS100 also showed signs of exhaustion, reflecting broader investor hesitation as macroeconomic and geopolitical uncertainties mount.
From a technical perspective, U.S. stock indices remain exposed to further downside if trade tensions intensify or the Federal Reserve adopts a more cautious tone. The market is still in a fragile recovery phase, and a renewed wave of risk-off sentiment could quickly erase recent gains. Notably, key indices are currently struggling to break above their 200-day moving average, reinforcing resistance at these levels.
Fed Policy Decision in Focus
All eyes are on the upcoming Federal Reserve meeting this Thursday, which is expected to play a pivotal role in shaping near-term market direction. While the Fed is widely expected to leave rates unchanged in May, escalating trade concerns could prompt a more hawkish or cautious tone.
Investors will be watching closely for updated guidance on the timing and pace of potential rate cuts—particularly whether policymakers are leaning toward action in June or July. A hawkish signal may dampen equity sentiment, especially in an environment already clouded by trade uncertainty and broader economic headwinds. Conversely, any dovish shift could help lift equities and reinforce recent market momentum.
