The US Stock Market Recovery: Five Signals Show the End of Sell-Off Caused by Tariffs.
After several weeks of volatility caused by uncertainty over tariff policies, the U.S. stock market has recently shown several signs of improving sentiment, indicating that the wave of sell-offs might be over. Major stock indices have been rising consecutively, global stock funds have seen a net inflow of capital, the risk premium on high-yield bonds has narrowed, risk assets have gained traction, and technical indicators suggest improved market momentum. Together, these factors indicate that the market is gradually stabilizing.
Key Updates
04/26 06:31
The US Stock Market Recovery: Five Signals Show the End of Sell-Off Caused by Tariffs.
After several weeks of volatility caused by uncertainty over tariff policies, the U.S. stock market has recently shown several signs of improving sentiment, indicating that the wave of sell-offs might be over. Major stock indices have been rising consecutively, global stock funds have seen a net inflow of capital, the risk premium on high-yield bonds has narrowed, risk assets have gained traction, and technical indicators suggest improved market momentum. Together, these factors indicate that the market is gradually stabilizing.
1. Major Stock Indices Rise for Four Consecutive Days, Led by Tech Stocks
Over the past week, major U.S. stock indices have demonstrated strong recovery momentum. The S&P 500 Index rose 0.72% to close at 5,525.21 points; the tech-heavy Nasdaq Composite Index increased by 1.11% to close at 17,282.94 points, both closing higher for the fourth consecutive trading day. The Dow Jones Industrial Average edged up 0.01% to close at 40,113.50 points. Notably, tech stocks stood out, with Tesla surging 9.80% in a single day, Nvidia rising 4.30%, Meta Platforms up 2.65%, and Alphabet climbing 1.68% due to better-than-expected earnings. This tech-led upward trend reflects a diminishing concern over tariff risks and strong investor confidence in these companies' global competitiveness and financial resilience.
2. Global Equity Funds Experience Net Inflows for Two Consecutive Weeks
According to LSEG Lipper data, global equity funds experienced a net inflow of $9.11 billion in the week ending April 23, up from $5.58 billion the previous week. This marks the second consecutive week of net inflows, indicating a rebound in demand for high-risk assets. Although U.S. domestic equity funds still experienced slight outflows, the scale of outflows has significantly reduced, dropping from $10.44 billion the previous week to $1.35 billion, reflecting increased expectations for easing U.S.-China tariff tensions.
3. High-Yield Bond Market Risk Premium Narrows Significantly
The high-yield bond market is also sending positive signals. The BofA U.S. High Yield Index's Option-Adjusted Spread decreased from 4.61% on April 7 to 3.75% this week, reversing more than half of the widening since the end of March. This change indicates that concerns about an economic recession are diminishing, and investors are becoming more accepting of risk assets.
4. Risk Assets Warm Up Across the Board, Market Sentiment Turns Optimistic
In recent weeks, the overall sentiment in the U.S. financial market has noticeably warmed. The 10-year U.S. Treasury yield has dropped more than 20 basis points over two weeks, the dollar exchange rate has stabilized, high-yield bond risk premiums have narrowed, and credit market volatility indicators have significantly declined. Leveraged ETFs have drawn approximately $7 billion in inflows, with the dollar, U.S. stocks, and U.S. bonds rising in tandem, marking the best coordinated performance of the year. These phenomena collectively indicate that the market is re-embracing risk assets, with confidence in future economic prospects recovering.
5. Technical Indicators Show Improved Market Momentum
On the technical front, both the S&P 500 Index and the Nasdaq Composite Index have shown positive daily and weekly momentum signals for the first time in weeks. Although the overall trend pattern remains challenging, the improvement in short-term momentum suggests the market may be approaching a significant turning point. Additionally, the Philadelphia Semiconductor Index rose 0.91%, continuing its double-digit gains from the past week. The continued rise in semiconductor stocks, which are highly sensitive to Chinese trade dynamics, further strengthens the market's belief that the worst-case scenario has passed.
