U.S. Indices Bounce Back Amid Trade War Tensions: Tariffs and Fed Fears Drive Volatility
2025-04-23 12:07:05
U.S. Indices Bounce Back Amid Trade War Tensions: Tariffs and Fed Fears Drive Volatility
Overview
After a bruising selloff driven by renewed trade tensions, U.S. stock indices rebounded — but the damage caused by escalating tariffs is far from over. Should traders fade the rally or follow the flows?
Policy Risk: Trump-Fed Tensions and Tariff Shifts Reshape Market Sentiment
- Political pressure on Fed Chair Powell raises concerns about U.S. monetary policy independence.
- A 90-day tariff pause lifted sentiment short term, but China’s exclusion and retaliatory risks remain unresolved.
Dow Jones (US30): Trade Reprieve Fuels Relief, But Political Risk Lingers
- Suspension of tariffs on industrial imports supported a sharp index rebound.
- Lingering uncertainty over Trump’s Fed stance limits conviction in the recovery.
Nasdaq 100: Tech Pauses with Tariff Relief, But China Exposure Still a Drag
- Semiconductor and electronics exemptions boosted chipmakers and big tech temporarily.
- Nvidia-led losses reflect concern over U.S.-China restrictions on AI components and exports.
S&P 500: Broad Rebound on Relief Sentiment, But Growth Fears Persist
- IMF cut 2025 growth forecast to 2.8%, highlighting tariff-driven global slowdown.
- Political friction and soft macro data leave equities vulnerable to sentiment swings.
Big Picture: From Panic to Relief — but for How Long?
US indices may have staged a comeback on Tuesday, but the real story lies beneath the surface: escalating tariffs are strangling global growth, eroding investor confidence, and reshaping capital flows.
The International Monetary Fund (IMF) slashed its global growth forecast to 2.8% for 2025, explicitly citing U.S.-driven tariff hikes as a primary reason. With President Trump threatening more reciprocal tariffs and reigniting economic nationalism, the prospect of prolonged global slowdown has reentered the trading narrative.
Add to that political tension with the Federal Reserve and it’s clear: the rebound is technical relief — not a vote of confidence.
Powell Under Pressure: Fed Independence in the Crosshairs
Meanwhile, Fed Chair Jerome Powell remains under political scrutiny, and Trump’s comments have only heightened the sense of institutional instability.
Markets aren't just pricing in economic risks — they're now weighing the credibility of U.S. monetary policy.
President Trump’s recent public jabs at Fed Chair Jerome Powell have revived concerns that the White House may try to remove or politically coerce the Federal Reserve leader. While Trump later clarified he had "no immediate plans" to fire Powell, the damage was done:
- Investors fear a compromised Fed may delay necessary policy actions to appease political goals.
- Central bank credibility is crucial to dollar stability, and political interference invites volatility.
- Historical precedents show that Fed independence is essential to managing inflation and recession risk.
For traders, this tension adds another layer of systemic risk — especially when Powell is seen as the last stabilizing force in a trade-torn macro climate.
Tariffs + Politics = Fragile Foundation
Let’s be clear: this isn't just a market correction. It’s a reaction to a destabilized policy environment.
- Tariffs are dampening demand and disrupting corporate outlooks.
- Political tension with the Fed risks monetary policy paralysis.
- Global capital is responding by rotating out of U.S. equities and into more politically stable jurisdictions.
The rally? It's real, but it's relief — not resolution.
Technical Outlook
For previous forecast, checkout my previous blog: https://acy.com/en/market-news/market-analysis/us-stock-market-strength-trump-90-day-tariff-pause-j-o-04112025-142127/
Dow Jones
Daily
Amidst trade tensions, Fed pressures, and US economic concerns, Dow is holding its ground and currently trading above the equilibrium level or the 50% of the whole range.
If this relief is “legit” and we are seeing that the market is continuously adapting, we’d like to see price testing the highs of the range, and if strength continues to elevate, we’d like price to breakout unless everything’s just a breather.
4-Hour
4-Hour chart suggests that we are in an on-going upside momentum, intraday, and we are looking for a continued upside above the FVG level sitting at 39275.40 - 39607.26.
We can also look at a bounce opportunity at that level for upside potential.
The Dow was heavily hit by tariff escalation fears. Recovery came only after Trump eased off Powell rhetoric, giving investors a short-term green light.
Nasdaq
Daily
Following a sharp selloff triggered by escalating trade tensions and political uncertainty, U.S. stock indices have rebounded, buoyed by a 90-day pause on tariffs affecting over 75 countries.
After breaking down from the macro range on the daily, Nasdaq managed to bounce back at the support level resting at 17800 level.
Tech Sector: Temporary Relief with Lingering Concerns
The technology sector experienced a notable uptick following the tariff pause:
- Apple Inc. and Nvidia Corp. saw significant stock price increases due to exemptions on smartphones, computers, and semiconductors.
- Dell Technologies and HP Inc. also benefited from the temporary relief, given their reliance on Chinese manufacturing.
However, the relief is expected to be short-lived. President Trump has indicated that these exemptions are temporary and subject to review, particularly concerning national security implications.
4-Hour
A bounce on 18380.00 - 18529.98 volume imbalance could push Nasdaq to new highs in the 4-Hour chart. As long as we get bullish follow-through and price gets sustained, 19300 level can be set as a target for a potential reversal on a macroscale for upside potential.
The sector is highly sensitive to both trade policy and Fed tone. Confidence in the Fed’s policy direction is essential for Nasdaq’s long-duration growth narrative.
S&P 500
Bounce from Support, But Under Macro Fire
4-Hour
Compared to Nasdaq and Dow, S&P did not close below the range and only “wick-ed” it and reacted positively.
S&P also broke out of the equilibrium level with a potential bounce at 5302.64 - 5349.46 for upside opportunity.
The index captured a mix of risk relief and strong earnings — but Powell-Trump friction remains a shadow over its trajectory.
Trader Playbook: Strategy in a Politicized Market
- Time Your Entries Around Volatility Windows - New York Session
- Focus on U.S. session hours: 9:30AM–4:00PM EST.
- Watch Powell speeches and Trump pressers — they can move markets fast. Usually 2PM EST.
- Watch Key Levels using the ERL / IRL.
- Check my blog for reference: https://acy.com/en/market-news/education/smc-playbook-series-part-2-spot-liquidity-pools-trading-j-o-103837/
- Risk Control Is Priority
- Be Selective, Not Passive
- Check this for entry and exit locations:
- There’s no reward for forcing trades in uncertainty.
- Focus on high-probability setups or sit in cash when unclear.
Final Word
The current rally is not a sign of macro strength — it’s a response to fear overblown and slightly cooled.
Traders must now navigate a two-headed threat:
- Tariffs that erode growth
- Politics that erode monetary credibility
The market is no longer just watching the Fed — it’s watching whether the Fed can still act freely. And that, more than earnings or inflation, could define the next leg in U.S. equities.
Stay nimble. Stay focused. Let structure guide your edge — not emotion.
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