The S&P 500 just exploded, adding $1.3 trillion to the U.S. stock market in a single session. The index jumped 2.13% to close at 5,638.94, which is its biggest one-day gain of the year. The Dow Jones Industrial Average spiked 674.62 points to end at 41,488.19, while the Nasdaq Composite surged 2.61%, closing at 17,754.09. After weeks of brutal losses, traders rushed back in, sending stocks flying.
Tech stocks led the charge. Nvidia soared over 5%, Tesla jumped by nearly 4%, and Meta gained close to 3%. Amazon and Apple also rallied. The market snapped back after Thursday’s sharp sell-off, which had dragged the S&P 500 into correction territory—down by 10% from its record close just 16 days ago. The Nasdaq had already fallen into correction, and the Russell 2000 was inching toward a bear market, down nearly 20% from its peak.
Stocks rally as tariff fears fade for now
After three weeks of chaos driven by President Donald Trump’s trade policies, stocks finally caught a break. No new tariff headlines came out of the White House on Friday, giving traders a reason to buy back into beaten-down stocks. The market had been spiraling in uncertainty, with Trump’s back-and-forth on tariffs keeping investors on edge.
Even with Friday’s rally, the Dow still ended the week down by 3.1%, its worst performance since March 2023. The S&P 500 and Nasdaq both lost more than 2%, logging their fourth straight weekly drop, according to data from CNBC.
Adding to the market’s relief, Chuck Schumer said he wouldn’t block a Republican government funding bill, easing concerns about a potential shutdown. But fresh economic data wasn’t as optimistic. The University of Michigan reported that consumer confidence dropped to 57.9, far below the expected 63.2. Tariff uncertainty, inflation concerns, and stock market volatility have left consumers uneasy.
Traders are questioning whether Friday’s bounce was just a dead cat bounce or if markets have finally found a bottom. Thomas Martin, a portfolio manager at Globalt Investments, isn’t convinced. “Consumer sentiment came in worse, inflation expectations are rising, the 10-year Treasury yield is rising. You would think that the market would be off. So a lot of folks are watching to see if this rally has any breadth or legs,” he said.
Investors focus on the Federal Reserve’s next move
The next big test for the market comes next week when the Federal Reserve holds its policy meeting. CME’s FedWatch Tool puts the odds of rates staying unchanged at 97%, but traders will be listening closely to Jerome Powell’s post-meeting comments for any hint of future moves.
Martin warned that any rate hikes would shake investor confidence. “What we would like to see is rates not go up, because that would be an indication that the Fed is losing control. If the Fed says they’re cutting and rates go up, that’s a lack of confidence,” he said.
Investors are also watching upcoming economic reports, including retail sales, housing starts, and industrial production. The market is on edge after airlines and retailers issued warnings about weakening consumer demand. Airline CEOs from American, Delta, and Southwest have all slashed their first-quarter forecasts, citing slowing travel. Kohl’s and Dick’s Sporting Goods also signaled that 2025 would be a rough year.
The S&P 500 remains in a fragile state. Vishal Khanduja, who runs broad markets fixed income at Morgan Stanley Investment Management, doesn’t think stocks have hit bottom yet. “We don’t think that we’ve seen the bottom. Volatility will be high, so there could be a little bit more downside before there is clarity from the policy side,” he said.
Nvidia’s GTC event and global markets add to uncertainty
While the Federal Reserve and economic data will dominate headlines, tech investors are locked in on Nvidia’s GTC developer conference next week. Jensen Huang will take the stage to talk about AI and the company’s next-gen chips. Nvidia, which has been in a bear market after falling by more than 20% from its highs, could see a major move. According to Wells Fargo, Nvidia has historically outperformed the SOXX index by 6.5 percentage points during GTC week.
Meanwhile, Germany is reacting to Trump’s policies. Friedrich Merz, the leader of the Conservative Party, has unveiled plans to change the country’s “debt brake” to boost military spending. The German 10-year bund yield has already climbed by 2.9%, up from 2.3% last month, showing that markets are preparing for fiscal policy changes from Trump.
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