Written by Linh Tran, Market Analyst at XS.com
S&P 500 had an impressive 1.68% gain last Friday as no new tariff moves were announced by President Donald Trump, while the Senate also passed a temporary spending bill to prevent a government shutdown.
The Friday rally of the S&P 500 was driven by several positive factors:
Trade tensions between the U.S. and China, along with other countries, have been a long-standing factor of market instability. President Trump’s actions, such as imposing tariffs or threatening to do so in recent times, have caused negative reactions in the stock market. The absence of new announcements from President Trump on Friday helped ease concerns about escalating trade tensions. This created a positive sentiment for investors, as they did not have to face additional short-term uncertainties.
The U.S. Senate’s expected approval of a temporary spending bill helped avert the risk of a government shutdown. This provided stability and alleviated concerns about disruptions in government operations. Investors felt more reassured, leading to a positive market sentiment, which contributed to the S&P 500’s gain in the last trading session of the previous week.
Additionally, expectations that the Fed may cut interest rates in Q3 helped stabilize investor confidence. A rate cut could support economic growth and ease pressure on businesses, especially in the context of a slowing global economy. Investors expect that a more accommodative monetary policy will support the stock market.
The delay of geopolitical risks is also one of the factors that helps cool the ongoing sell-off. These factors created a favorable environment for the stock market, leading to last Friday’s rally. However, a single positive trading session is not enough to pull the S&P 500 out of the previous strong downtrend, with a 10% loss from its peak in February.
Despite the recent recovery, the market still faces many challenges. Data from Bank of America shows that equity outflows reached the highest level of the year, while inflows into U.S. Treasury bonds were the largest since last August. Around $3 trillion has been wiped out from global stock market capitalization this week, bringing total losses since the February 19 peak to about $7 trillion, primarily from the U.S.
Additionally, gold prices surpassed $3,000 per ounce for the first time, indicating a surge in demand for safe-haven assets. The VIX index (which measures market volatility) remains high, reflecting investor uncertainty. Therefore, despite the S&P 500’s impressive performance in the last trading session of the past week, it is currently seen as an adjustment rather than a confirmed reversal.
Next week, the market will focus on the Fed’s policy meeting on March 20. Although the Fed is expected to keep interest rates at 5.25% – 5.50%, signals regarding future monetary policy could strongly influence stock market movements, including the S&P 500.