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04 Apr

Week Ahead: S&P 500 to flirt with “bear market”?

April 4, 2025

By ForexTime 

  • US500 plummets to lowest since August; after Thursday’s biggest 1-day drop since pandemic
  • China announces tariff retaliation ahead of Friday’s NFP, Powell speech
  • Week Ahead: EU retaliation, US CPI, and earnings season could trigger more big moves!
  • Markets may not find comfort from Fed speakers next week
  • Technical rebound likely not sustained, barring stunning risk turnaround
  • Wall Street still forecasting new record high for S&P 500 over next 12 months
  • US500 would officially enter “bear market” if it falls to 4921.04.

     

US stock indices are extending their steep drop on Friday!

This comes after just posting their biggest one-day drop since the pandemic on Thursday, April 3rd, 2025 when the:

  • S&P 500 (tracked by FXTM’s US500) fell 4.84%.
  • Dow Jones Industrial Average a.k.a. the Dow (tracked by FXTM’s US30) fell 3.98%.
  • S&P Midcap 400 index (tracked by FXTM’s US400) fell 6.66%.
  • Russell 2000 (tracked by FXTM’s RUS2000) fell 6.59%.

Thursday’s declines marked their largest one-day drop (in % terms) for each of these US stock indices since June 11th, 2020!

As for the tech-heavy Nasdaq 100 (tracked by FXTM’s NAS100), it fell 5.41% yesterday – nearly matching its 5.54% plummet on September 13th, 2022.

READ MORE: Trump’s “Liberation Day” Tariffs: How are markets reacting? (published Thursday, April 3rd, 2025)

 

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Why are US stock markets falling on Friday (April 4th)?

In a tit-for-tat move, China has just responded to US President Donald Trump’s “liberation day” tariff hike earlier this week (Wednesday, April 2nd).

Today, China announced 34% tariffs on all US imports starting April 10th!

Although the 34% number is lower than the 54% rate imposed by President Trump on Chinese shipments …

This has clearly escalated the trade war between the world’s two largest economies! 

This has left investors and traders worldwide outright fearful about the impact from an escalating global trade war, potentially sending the world into a recession!

And there could be even more volatility today for US stock indices.

Note that these steep declines at the time of writing are happening even before the release of the monthly US jobs report (NFP – nonfarm payrolls) as Fed Chair Jerome Powell’s speech due later today (Friday, April 4th).

 

And that’s before we enter the week ahead which features these key scheduled economic events:

Monday, April 7

  • XAU: China foreign reserves
  • GER40 index: Germany February industrial production, external trade
  • EUR: EU trade minister to discuss reaction to Trump tariffs; Eurozone February retail sales
  • USDInd: Speech by Dallas Fed President Lorie Logan

Tuesday, April 8

  • AUD: Australia April consumer confidence; March business confidence
  • TWN index: Taiwan March CPI, PPI
  • USDInd: Speech by San Franscisco Fed President Mary Daly

Wednesday, April 9

  • NZD: RBNZ rate decision
  • MXN: Mexico March CPI
  • USDInd: FOMC meeting minutes; speech by Richmond Fed President Tom Barkin
  • US “reciprocal” tariffs go into effect

Thursday, April 10

  • JP225 index: Japan March PPI
  • CN50 index: China March CPI, PPI
  • TWN index: Taiwan March trade balance
  • US500 index: US March CPI
  • RUS2000 index: US initial weekly jobless claims; speeches by Chicago Fed President Austan Goolsbee, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan
  • China’s retaliatory 34% tariffs against US go into effect

Friday, April 11

  • NZD: New Zealand March manufacturing PMI
  • GBP: UK February GDP, industrial production, trade balance
  • US400 index: US April consumer sentiment; March PPI
  • USDInd: Speeches by New York Fed President John Williams, St. Louis Fed President Alberto Musalem
  • US30 index: US earnings season kicks off with JPMorgan Chase, Morgan Stanley, Wells Fargo etc.

 

 

3 things to look out for next week (April 7– 11):

 

1) Monday, April 7th: Tariff Retaliation

EU trade ministers are set to gather in Luxembourg for a closely-watched meeting.

The agenda?

To formulate the EU’s reaction to President Trump’s tariff salvo.

  • BEARISH: US stock indexes could fall further if the EU adopts an aggressive stance, emulating China, and retaliates in a tit-for-tat manner.
  • BULLISH: US stock indexes could rebound if the EU adopts a more conciliatory tone with the US administration, looking to swiftly strike a trade deal instead.

 

2) Thursday, April 10th: US March consumer price index (CPI)

Here’s what economists predict for the upcoming inflation report (CPI measures inflation)

  • CPI month-on-month (March 2025 vs. February 2025): 0.1%

If so, this would be lower than February’s 0.2% month-on-month number.

  • CPI year-on-year (March 2025 vs. March 2024): 2.6%

If so, this would be lower than February’s 2.8% year-on-year number.

  • Core CPI (excluding volatile food and energy prices) month-on-month: 0.3%

If so, this would be higher than February’s 0.2% core month-on-month number.

  • Core CPI year-on-year: 3.0%

If so, this would be lower than February’s 3.1% core year-on-year number.

US stagflation fears are running rampant across US stock markets as we head into the weekend and is set to persist into the coming week.

NOTE: Stagflation is when inflation remains high, at a time when economic growth is sluggish.

  • BEARISH: US stock indexes could fall further if the CPI numbers come in higher-than-expected, lending credence to a stagflation scenario.
  • BULLISH: US stock indexes could rebound if the CPI numbers come in lower-than-expected, easing stagflation fears.

 

3) Friday, April 11th: US earnings season kicks off with Wall Street banks

Banking titans such as JPMorgan Chase, Bank of New York Mellon, Morgan Stanley, and Wells Fargo are due to report their respective Q1 earnings a week from today.

However, markets are set to look past the backward-looking reported figures, and instead focus on the earnings outlook for these major US banks, in light of stagflation/recession risks.

  • BEARISH: US stock indexes could fall further if these banking giants sound the alarm about a looming stagflation/recession for the world’s largest economy.
  • BULLISH: US stock indexes could rebound if these banking giants remain confident about their respective earnings and the broader US economic growth narrative, despite President Trump’s tariff shocker.

 

But wait, there’s more.

Beyond the 3 above-listed events, note that the coming week will also be peppered with Fed Speak.

At least 7 different Fed officials are set to make scheduled speeches in the week ahead.

  • BEARISH: US stock indexes could fall further if these Fed officials, especially those speaking after the CPI print, say they are more hesitant to cut interest rates this year as tariffs may reignite US inflation.
  • BULLISH: US stock indexes could rebound if these Fed officials view the potential inflationary impact from US tariffs as being “transitory”, in turn allowing the Fed to eventually cut rates later this year.

 

 

US500 in focus

FXTM’s US500 tracks the S&P 500 – the most widely-used benchmark for US stock markets.

At the time of writing, the US500 is testing support around the big 5,200 level.

From a technical perspective, it appears to have met the textbook threshold for “oversold” conditions, as its 14-day relative strength has dropped below the 30 line.

This suggests a near-term technical pullback could be in order (depending on how today’s NFP and Powell speech pan out).

S&P 500 falls sharply further into technical correction

 

  • BEARISH: If the downside momentum persists over the coming week, the US500 may fall to the big, round 5k level – a level last seen 12 months ago (April 2024).

The US500 at the 5,000 level would put it within spitting distance of a ‘bear market”!

NOTE: A “bear market” is when prices have fallen 20% from its recent peak. 
A 20% drop from the US500’s all-time intraday high of 6151.3 (on February 19th, 2025) would be 4921.04.

 

  • BULLISH: If there’s an abrupt turnaround in risk sentiment, perhaps by way of an easing of trade war/stagflation/recession fears, that could see the US500 recover back to 5400.

 

 

Over the long term …

Wall Street experts still predict the US stock markets to recover eventually by this time next year, with the aggregated 12-month target price for the S&P 500 now standing at 6822.87.

If those long-term predictions come true …

That would mark a new record high for the S&P 500/US500, and a whopping 26.4% in potential upside over the coming year.

However, before it can presumably get there, traders must first battle through the twists and turns in the days ahead pertaining to the Trump-led trade war.

Although market fears are still running high, and risks still aplenty, there are bound to be sizeable trading opportunities amidst all the market volatility expected in the coming week.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com


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