U.S. stocks have risen for four straight days: Market sentiment has improved, but the Federal Reserve warns about the risks of supply shocks.

Taiwan • Business • 05/16 09:54
U.S. stocks have risen for four straight days: Market sentiment has improved, but the Federal Reserve warns about the risks of supply shocks.

U.S. stocks continued to rise this week, with the S&P 500 index closing higher for four consecutive days. The Dow Jones index rose over 270 points on May 15, due to the easing of U.S.-China tariffs and improving economic data, which boosted market confidence. Federal Reserve Chairman Powell warned that supply shocks could become more frequent and persistent, highlighting that the market still faces risks. Issues such as supply chain bottlenecks, policy uncertainty, and weak consumer spending remain, urging investors to remain vigilant.

Key Updates

05/17 22:17

Moody's downgrade of U.S. debt leads to an increase in yields, as Trump signs a $2 trillion deal during his Middle East trip, boosting AI and prompting a stock market rebound.

On May 16, 2025, Moody's downgraded the United States' sovereign credit rating from "Aaa" to "Aa1," leading the 10-year U.S. Treasury yield to rise to 4.49%, and U.S. stocks were under pressure after hours. President Trump visited the Middle East that same week, signing economic and arms deals exceeding $2 trillion with Saudi Arabia, the UAE, and Qatar, and facilitated cooperation on AI chips, which boosted tech stocks. Despite the short-term volatility caused by the downgrade, the market remained optimistic due to the strong performance of AI and tech stocks.

05/17 14:27

Lisa Shalett, Chief Investment Officer at Morgan Stanley, warns: The rebound in U.S. stocks might be coming to an end, suggesting a shift from technology stocks to the financial and healthcare sectors.

Morgan Stanley Wealth Management's Chief Investment Officer, Xia Leite, warns that the rebound in U.S. stocks is unlikely to be sustained. She advises investors to realize profits from tech stocks and shift towards industries such as finance, energy, and healthcare, which benefit from regulatory easing. She points out that there is a structural shift in the AI sector, with corporate revenues and free cash flows below expectations, constraining the market's upward potential. Xia Leite's view aligns with changes in market fund flows, indicating an increasing preference among investors for defensive and value-oriented assets.

05/16 22:55

U.S.-China Tariff Deal and Trump's Visit to the Middle East Boosts the Market: Tech Stocks Lead the Gains, All Three Major U.S. Stock Indices Rise

On May 16, 2025, the US stock market closed higher across the board due to a 90-day tariff suspension agreement reached between US-China and a $200 billion trade agreement as a result of President Trump's visit to the Middle East. The Dow Jones Industrial Average rose by 331 points, the S&P 500 Index closed in the green for the fifth consecutive day, and the Nasdaq Composite rose by nearly 100 points. Tech stocks led the rally, with Tesla and Nvidia stocks rising 17% and 16% respectively this week. However, the US consumer confidence index dropped to its second-lowest level on record, and inflation expectations hit their highest level since 1981, contributing to market uncertainty.

05/16 21:54

U.S. stocks have rebounded strongly this week: Outstanding corporate earnings, relief from U.S.-China tariffs, and diminished inflationary pressure

In the second week of May 2025, the U.S. stock market rebounded strongly, with the S&P 500 index rising nearly 5% for the week. Driving factors included corporate earnings exceeding expectations, a temporary pause in the US-China tariff war, inflation data indicating reduced pressures, and market expectations of a shift in Federal Reserve policies. However, the technology and semiconductor sectors performed weakly, reflecting the market's conflicting views on the AI boom versus the real economy.

05/16 18:26

S&P 500 Index Rises for Five Straight Days: Eased US-China Trade Tensions and Corporate Mergers and Acquisitions Lift Market Sentiment

On May 16, 2025, the S&P 500 index of the U.S. stock market rose for the fifth consecutive trading day, with a total weekly gain of 4.5%. The rally was driven by a reduction in U.S.-China trade tensions, the merger between Charter and Cox, a depreciating dollar, moderate inflation figures, and expectations of a potential rate cut by the Federal Reserve. Investors moved funds back into riskier assets, and market sentiment warmed.

05/16 09:54

U.S. stocks have risen for four straight days: Market sentiment has improved, but the Federal Reserve warns about the risks of supply shocks.

U.S. stocks continued to rise this week, with the S&P 500 index closing higher for four consecutive days. The Dow Jones index rose over 270 points on May 15, due to the easing of U.S.-China tariffs and improving economic data, which boosted market confidence. Federal Reserve Chairman Powell warned that supply shocks could become more frequent and persistent, highlighting that the market still faces risks. Issues such as supply chain bottlenecks, policy uncertainty, and weak consumer spending remain, urging investors to remain vigilant.

05/16 02:58

In April, the US Producer Price Index (PPI) saw its largest decline in five years, putting pressure on technology stocks, leading to mixed results in the US stock market; the Taiwan stock market closed at 21,730 points, as foreign investors have been net buyers for ten consecutive days.

The U.S. Producer Price Index (PPI) fell by 0.5% in April, marking the largest monthly drop in five years, mainly due to a decrease in service prices, indicating a reduction in inflationary pressures. Following the release of this data, the U.S. stock market showed mixed performance, as the Dow Jones and S&P 500 rose, while the Nasdaq and Philadelphia Semiconductor Index fell. On the 15th, Taiwan's weighted index closed down by 52.62 points to 21,730.25, as foreign investors net bought for the tenth consecutive day, with a single-day net purchase of NT$7.534 billion, accumulating over NT$200 billion in net purchases over ten days.

05/16 02:58

U.S. stock futures fluctuate in early morning trading: Dow drops slightly by 17 points, Nasdaq and S&P both retreat.

On May 16, 2025 (local time in Taipei), in early trading, U.S. stock futures were volatile. The Dow Jones Industrial Average futures stood at 42,368 points, down 17 points or 0.04%; the S&P 500 futures were at 5,925.25 points, down 8 points or 0.13%; and the Nasdaq 100 futures were at 21,361.75 points, down 38.5 points or 0.18%. This was in contrast to the rise seen at 08:31, when futures for the three major indices saw a slight uptick. After a mixed performance in the previous trading day, investor sentiment was cautious.

05/16 01:24

JPMorgan CEO Jamie Dimon, in Paris, warns about recession risks, and the uncertainty surrounding US-China trade negotiations is impacting US stock performance.

On May 15, 2025, JPMorgan Chase's CEO, Jamie Dimon, warned at the Global Markets Conference in Paris that despite the easing of US-China tariff tensions, global economic uncertainties and recession risks still exist. Progress in the US-China trade negotiations has been limited, and market sentiment is cautious. On that day, the performance of US stocks was mixed, with the Dow Jones Industrial Average rising 271 points, the S&P 500 closing higher for the fourth consecutive day, while the Nasdaq and the Philadelphia Semiconductor Index experienced slight declines.

05/15 22:55

US stocks are mixed: Employment data is steady, IMF cuts global growth forecast; US-South Korea forex talks lead to Korean won fluctuations

On May 16, 2025, the major indices of the U.S. stock market had mixed performances, with the Dow Jones Industrial Average rising by 0.65% and the S&P 500 Index by 0.41%, while the Nasdaq Index fell by 0.18%. The U.S. non-farm employment report for April showed an increase of 177,000 jobs, with the unemployment rate remaining at 4.2%. The IMF downgraded the 2025 global economic growth forecast to 2.8%, citing U.S. tariff policies as the reason. The U.S.-South Korea foreign exchange policy talks led to fluctuations in the Korean won, and the appreciation of the New Taiwan dollar attracted attention, though the Taiwan-U.S. tariff negotiations did not address exchange rate issues.

Performance of Major US Stock Indices: S&P 500 Rises for Fourth Consecutive Day, Dow Gains Over 270 Points

According to CNBC, US stocks had a strong close on Thursday. The S&P 500 index rose by 24.35 points, or 0.41%, closing at 5,916.93 points, bringing the weekly gain to 4.54%. The Dow Jones Industrial Average increased by 271.69 points, or 0.65%, closing at 42,322.75 points. In contrast, the tech-heavy Nasdaq index fell by 34.49 points, or 0.18%, closing at 19,112.32 points, while the Philadelphia Semiconductor Index also dropped by 0.57%.

This wave of gains was mainly driven by the easing of US-China trade tensions. The US and China recently reached an agreement to temporarily reduce some tariffs, which the market interpreted as a short-term benefit to economic activity, leading to a rebound in investor confidence.

Investor Sentiment Warms: Corporate Earnings and Economic Data Fuel Market Momentum

In addition to geopolitical easing, corporate earnings and economic data also fueled market momentum. Cisco's stock price surged by 5.8% after its earnings report, demonstrating the resilience of corporate profits. On the other hand, the US Producer Price Index (PPI) for April unexpectedly declined, with both core and overall data below expectations, suggesting that inflationary pressures may be easing.

Retail sales data released on the same day also slightly exceeded expectations, rising by 0.1% month-on-month in April. Although the increase was modest, it was seen as a positive signal against the backdrop of market concerns about weak consumption. Analysts at Wells Fargo pointed out that retail sales will be an important indicator to observe the impact of tariffs in the coming months.

Analyst Views: Capital Replenishment and Active Buying Boost Market

Analysts at JPMorgan pointed out that the recent market rebound is not merely a short-covering rally but a result of active capital inflows. The warming of CTA (Commodity Trading Advisor) and corporate buyback activities indicates that funds are gradually returning to the stock market. The catch-up rally in industrial and cyclical stocks also reflects the market's optimistic outlook on the economic future.

Consumer sector analysts noted that early May consumption data performed well, further supporting the bullish market sentiment. Although some large retailers like Walmart have revised their outlooks downward due to tariff pressures, overall consumer momentum remains supportive.

Aftermath of "Supply Shocks": Supply Chain and Policy Uncertainty Persist

Despite the strong short-term market performance, Federal Reserve Chairman Powell reminded in his Thursday speech that the future economy may face more frequent and persistent "supply shocks." He noted that these shocks could lead to more volatile inflation, thereby pushing up long-term interest rates.

The aftermath of these "supply shocks" is evident in several areas:

  1. Unresolved Supply Chain Bottlenecks: Despite the US-China tariff agreement, China continues to restrict the export of seven rare earth metals to the US, which are crucial for the defense, energy, and automotive industries, indicating unresolved supply chain risks.

  2. Increased Policy Uncertainty: US President Trump recently pressured India, asking Apple not to set up factories there, indicating that trade policies remain highly uncertain. Such policy interventions could affect corporate investment and global supply chain layouts.

  3. Weak Consumer Momentum: According to Tastylive, household consumption's contribution to the US GDP in the first quarter hit a nearly two-year low. With consumption accounting for 68.5% of the US economy, continued weakness in consumption could pressure economic growth.

  4. Behavioral Biases Affecting Investment Decisions: According to CFA textbooks and behavioral finance research, market volatility can easily trigger investor biases such as "overconfidence," "loss aversion," and "mental accounting," leading to irrational decisions. For example, some investors may sell too early due to short-term rebounds, missing out on subsequent gains, or cut losses at low points due to significant asset losses, resulting in actual losses.

Market Observation: Capital Flows and International Dynamics

According to Japan's Ministry of Finance data, overseas investors net bought 8.21 trillion yen (approximately $56.6 billion) of Japanese assets in April, setting a historical high. This reflects that some funds are shifting from the US market to relatively stable markets like Japan, indicating that global capital allocation is still adjusting.

Additionally, the recent weakening of the dollar has drawn market attention. According to Vanguard analysis, the dollar's depreciation trend has intensified, partly due to economic uncertainty triggered by tariff policies. This could potentially pressure dollar-denominated assets.

References

People Also Ask...

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The US stock market has been rising nicely recently, but what does the Federal Reserve Chair mean by "supply shock"?

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The rally in the U.S. stock market continues, but will issues with the supply chain and uncertainty in policy impact future market performance?

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The US stock market has been on the rise for four straight days. How long will this rally continue? Are supply chain issues going to impact investments?