Market plummets on tariff news, but oversold signal suggests potential short-term recovery

From Yahoo Finance: 2025-04-07 20:03:00

The stock market plummeted after higher-than-anticipated tariffs were announced by President Trump, with the S&P 500 and Nasdaq Composite experiencing significant drops. The 54% tariff on China imports raised concerns about shrinking corporate sales and profit growth. Proponents believe tariffs will rejuvenate U.S. manufacturing, while opponents fear inflation and economic downturn.

The S&P 500’s recent sell-off triggered an oversold signal, indicating potential short-term market recovery. A bullish rally in recent years was propelled by optimism for Fed rate cuts and AI investment. However, concerns over rising inflation and a slowdown in AI spending have weighed on market sentiment, contributing to the recent downturn.

Despite the recent market retreat, the S&P 500’s valuation has improved, with the forward P/E ratio falling to more historically average levels. The sell-off has been swift and deep, leading to oversold sentiment indicators like the Fear/Greed Index and a surge in bearish outlooks. However, some indicators suggest a potential short-term market rebound may be on the horizon.

Various measures, including the VIX and put/call ratio, have spiked to levels indicative of short-term relief rallies. The relative strength index (RSI) has dropped below 30, signaling potential oversold conditions and a possible bounce in the S&P 500. While market fluctuations are unpredictable, these indicators point to a potential short-term recovery amidst ongoing economic uncertainties.



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