Stock market rally vs. the Fed

SP500

Key zone: 7,250 - 7,350

Buy: 7,400(after retest of level 7,330); target 7,550-7,650; StopLoss 7,330

Sell: 7,200 (on a strong negative foundation); target 7,000-6,850; StopLoss 7,270

The ceasefire in the Middle East has once again boosted risk appetite: global equity indices gained another 1.5–2%, while demand for long-term U.S. Treasuries also increased. Falling yields supported gold, which climbed above $4,700. At the same time, oil retreated into the $96–102 per barrel range, putting additional pressure on energy-sector stocks.

According to media reports, the parties to the conflict have moved closer to agreeing on a 14-point framework memorandum. The document could potentially lead to the reopening of the Strait of Hormuz and become the basis for further negotiations on Iran’s nuclear program.

At the same time, S&P 500 futures in premarket trading have yet to show a clear direction.

Recall:

The U.S. stock market is currently being driven primarily by corporate earnings and the AI sector rather than expectations of Federal Reserve easing. However, this is where the key contradiction emerges: if inflation accelerates again or the labor market remains too strong, high interest rates will begin to exert more severe pressure on equities — especially on small-cap companies and sectors sensitive to borrowing costs.

Key drivers behind the current rally:

• The market has largely stopped expecting a Fed rate cut this year;
• A strong U.S. economy, resilient labor market, and oil above $100 are increasing expectations that the Fed’s next move could be another hike rather than a cut;
• After a limited recovery from the selloff triggered by the conflict with Iran, markets are now prepared to react aggressively even to moderately positive news;
• Corporate earnings continue to support the indices and prevent investors from shifting into full risk-off mode.

Corporate earnings remain the key catalyst

In after-hours trading, attention once again focused on the technology sector:

• AMD surged more than 16% after strong earnings and upbeat guidance;
• Super Micro Computer gained around 18% thanks to solid profit forecasts;
• Arista Networks fell nearly 12% due to weaker margin performance.

The rise in the U.S. market remains concentrated in the largest technology companies. Europe appears more diversified, but the absence of large-scale tech leaders makes the energy sector the primary source of returns — accounting for roughly 40% of the market’s growth.

The paradox of the current situation is that the stock market rally is making the Fed’s job more difficult. Persistent gains in equity prices are easing financial conditions and reducing the effectiveness of tight monetary policy.

At the same time, any renewed escalation in the Middle East could accelerate the search for a compromise — but on terms less favorable to the United States. The main reasons are rising domestic gasoline prices, deteriorating voter sentiment, and growing tensions with major buyers of Iranian oil.

The equity market continues to trade on expectations of political de-escalation and strong corporate earnings despite the restrictive monetary backdrop. The rally may continue, but its upside potential remains limited while volatility stays elevated. For long-term investors, current pullbacks may provide opportunities for gradual position building, particularly in the technology sector.

So we act wisely and avoid unnecessary risks.

Profits to y’all!