Forex Analysis & Reviews: 03.06.2025 - Stock market recap on May...

03.06.2025 11:33 AM

Stock market recap on May 3: S&P 500 and Nasdaq resume losses

Following the previous regular session, US equity indices closed higher. The S&P 500 rose 0.41%, while the Nasdaq 100 gained 0.67%. The Dow Jones Industrial Average edged up by 0.08%.

However, futures on US stock indices declined today after rising during Monday evening's regular session, as investors awaited updates on trade talks between President Donald Trump and Chinese President Xi Jinping.

Futures contracts on the S&P 500 and Nasdaq 100 dropped by 0.3%, while contracts on European indices were mostly flat. The dollar strengthened against all major currencies, with the dollar strength index rising 0.2% after nearing its 2023 low during the previous session. Asian indices were little changed. US Treasury yields traded relatively stable.

Investors are closely monitoring how the US-China trade standoff will conclude, focusing particularly on whether Trump and Xi will meet to de-escalate tensions. Late last week, both nations accused each other of violating the trade agreement reached in May. This renewed exchange of blame added fuel to the fire, raising concerns over a further deterioration in relations and, consequently, a negative impact on the global economy. At the heart of the dispute are accusations that China failed to meet its commitments to increase imports of American goods, alongside US claims about continued intellectual property theft and unfair competition. What once appeared to be a potential diplomatic bridge between the two superpowers now faces significant uncertainty.

According to George Maris, chief investment officer at Principal Asset Management, the market is experiencing significant short-term volatility, warning that the situation could escalate dramatically if no resolution is reached. He emphasized that this represents the most pressing challenge markets would face in 2025, which explains why investors remain intensely focused on the issue.

Despite Trump's push to strike more trade agreements, negotiations with China and Europe remain stalled due to communication breakdowns and renewed tariff threats. The US president has long asserted that direct talks with Xi are the only way to resolve differences between the two countries. However, the Chinese leader has been reluctant to speak with his American counterpart by phone, preferring that advisers handle negotiations on key issues. The last known conversation between Trump and Xi took place in January ahead of the US presidential inauguration.

Trump's chief economic adviser Kevin Hassett recently indicated that the White House expects a phone call with the Chinese leader this week. However, Beijing has not confirmed any talks between the two presidents, even as the US continues to push for dialogue.

The offshore yuan strengthened, nearing its onshore counterpart, as the US pressed for talks between Trump and Xi. Meanwhile, China's manufacturing sector recorded its steepest contraction since September 2022.

As for commodities, oil rose for a second consecutive day as a weaker dollar boosted the appeal of dollar-denominated raw materials, while geopolitical tensions limited expectations of higher supply from Russia and Iran. Gold declined 0.5% after trade fears had sent investors into haven assets on Monday.

As for the technical outlook for the S&P 500, the main task for buyers today will be to break through the nearest resistance level of $5,921. This would help the index extend its gains and open the path toward a push to the next level of $5,933. Equally important for bulls is holding control above $5,951, which would reinforce bullish momentum. If the index moves lower amid fading risk appetite, buyers will need to make a stand near the $5,891 mark. A break below this level would swiftly drag the benchmark down to $5,877 and potentially open the way toward $5,854.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.