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29.01.2025 10:23 AM
Stock Market: S&P 500 and NASDAQ Resume Growth After Early-Week Drop

The U.S. stock market has rebounded following a sharp decline earlier this week, which was triggered by concerns over the Chinese startup DeepSeek. The sudden market drop made many investors question whether a fintech bubble was forming.

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Futures on the S&P 500 and NASDAQ have already gained around 0.3% today, while the Dow Jones Industrial Average has recovered by 0.2%. Asian indices and European stock futures followed Wall Street's rebound, driven by a recovery in the tech sector after a sell-off that rattled global markets. European Stoxx 50 futures rose after ASML Holding NV's earnings exceeded expectations. Nvidia Corp. also saw an 8.9% gain after experiencing the biggest single-day market cap loss in its history. Japanese, Australian, and Indian stocks are also trading in positive territory.

Stocks bounced back after a turbulent start to the week, which was fueled by fears over DeepSeek's budget-friendly AI model. However, investors are now viewing these developments as a potential boost for the industry.

Today, market focus shifts to the Federal Reserve's decision and earnings reports from major tech companies.

Fed officials are expected to keep borrowing costs unchanged, given strong demand and persistent inflation. Bond traders are raising bets on U.S. Treasury yields, anticipating that Fed Chair Jerome Powell might hint that rate cuts in March are still under consideration. A survey by 22V Research found that 67% of respondents expect little market reaction to the Fed's meeting, 21% remain risk-averse, and 12% are betting on further gains in risk assets.

Regarding concerns about a fintech bubble in U.S. stocks, Arthur Hayes pointed out that the current stock market valuation stands at 230% of GDP, significantly higher than the 175% during the dot-com bubble of the 2000s and far exceeding the 130% seen during the Great Depression. Ray Dalio also warned that the stock market appears to be in a bubble, while Robert Kiyosaki reiterated his view that the U.S. stock market is heading for the biggest crash in history.

Nassim Taleb, author of The Black Swan, believes that Nvidia's sell-off on January 27 was just the beginning, signaling a market shift as investors come to terms with the reality that not everything in U.S. fintech is as strong as it seemed. Given that Nvidia has been a key driver of the S&P 500's recent rally, its decline raises broader concerns.

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S&P 500 Technical Outlook

Demand for the S&P 500 remains strong. The primary target for buyers today is to break through resistance at $6079, which would support the continuation of the uptrend and open the way to a push toward $6092. A further breakthrough above $6107 would strengthen bullish momentum.

If risk appetite weakens and the index moves downward, buyers need to defend support at $6069. A failure at this level could trigger a decline toward $6058, with further downward potential extending to $6047.

Jakub Novak,
Analytical expert of InstaForex
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