Wells Fargo says S&P 500 could retest lows amid growing headwinds

Stocks

Summary:

Wells Fargo warns the S&P 500 may retest recent lows amid policy uncertainty, tariff stress, and fiscal tensions, recommending quality stocks in resilient sectors to navigate ongoing market volatility.

The S&P 500 could revisit its recent lows amid persistent policy uncertainty and tariff-related market stress, Wells Fargo’s top strategist warned.

The index had briefly declined 20% from its mid-February intraday record of 6,144 before staging a partial recovery. The S&P 500 is still down approximately 10% from its peak.

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, says that the pullback is consistent with historical averages, but warns that volatility may not be over.

“We wouldn’t be surprised if the SPX retested its lows as additional uncertainties create headwinds,” Wren said in a Wednesday note. Concerns over trade policy and the global growth outlook continue to weigh on investor sentiment.

Wren expects the market to remain in a broad trading range between 5,000 and 5,500 in the near term.

“It seems a catalyst will be needed to push the market noticeably higher,” he said, pointing to the possibility of a completed trade deal with Europe or China. However, such a breakthrough is likely to take time, as geopolitical maneuvering continues to cloud visibility.

“Meanwhile, U.S. and international leaders are posturing with moves and countermoves, which only leave investors with more questions,” Wren added.

The report also flagged U.S. fiscal policy debates as another potential source of turbulence. Legislative efforts to extend the Trump-era tax cuts and raise the debt ceiling are underway, but face hurdles due to narrow Republican majorities and broader political friction.

This, Wren cautions, could add to market volatility, especially as key budget deadlines approach in May.

Amid these uncertainties, the strategist is advocating for quality across portfolios. He recommends U.S. large- and mid-cap equities and favors sectors with strong balance sheets and cash flow generation, such as Information Technology, Communication Services, Financials, and Energy.

“Our view is that quality allocations should help preserve wealth and offer better growth opportunities as uncertainties finally fade,” Wren concluded.

Source: investing

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Manuel

Political

U.S. President Donald Trump's national security adviser Mike Waltz is being forced out of his job, four people briefed on the matter said on Thursday, in the first major shakeup of Trump's inner circle since he took office in January.

Waltz's deputy, Alex Wong, an Asia expert who was a State Department official focused on North Korea during Trump's first term, is also leaving his post, two people told Reuters.

Waltz, a 51-year-old former Republican lawmaker from Florida, faced criticism inside the White House when he was caught up in a March scandal involving a Signal chat among top Trump national security aides.

The national security adviser is a powerful role that does not require Senate confirmation. It was not immediately clear who would take over from Waltz. The National Security Council did not immediately reply to a request for comment.

Sources said the options included U.S. special envoy Steve Witkoff, who has been involved in Russia-Ukraine diplomacy as well as the Middle East, and Deputy Secretary of State Christopher Landau.

Secretary of State Marco Rubio could assume the position on a temporary basis while a permanent selection is settled upon, sources said.

The Waltz ouster caps a month of personnel turmoil within Trump's national security establishment. Since April 1, at least 20 NSC staffers have been fired, the director of the National Security Agency has been dismissed and three high-ranking Pentagon political appointees have been shown the door.

The purges have seriously hurt morale in some areas of the national security establishment, according to several officials within or close to the administration. Some elements of the government are low on relevant national security expertise and in some cases it has proven difficult to attract high-level talent, the officials added.

The NSC is the main body used by presidents to coordinate security strategy, and its staff often make key decisions regarding America's approach to the world's most volatile conflicts.

Waltz was blamed for accidentally adding the editor of The Atlantic magazine to a private thread describing details of an imminent U.S. bombing campaign in Yemen. The Atlantic reported on the mishap.

At a subsequent Cabinet meeting with Waltz in the room, Trump expressed his preference for holding such conversations in a secure setting, a clear sign of his displeasure. But he and others in the White House publicly expressed confidence in Waltz at the time. Waltz also attended Trump's televised Cabinet meeting on Wednesday.

WAVE OF FIRINGS

The NSC that Waltz will leave behind has been thinned by dismissals in recent weeks.

The bloodletting began a month ago, when Laura Loomer, a right-wing conspiracy theorist, handed Trump a list of individuals in the NSC she deemed to be disloyal during a meeting at the White House. Following that meeting, four senior directors were released.

Those four senior directors - who oversaw intelligence, technology, international organizations and legislative affairs, respectively - had a long history in conservative policymaking and no apparent animosity toward Trump, leaving colleagues puzzled by their dismissals, according to two people with direct knowledge of the matter.

Some NSC staffers were upset that Waltz did not more forcefully defend his staff, those people said.

Since then, more than 20 additional NSC staffers of various profiles have been let go, typically with no notice, the people said.

In recent weeks, multiple officials have declined positions at the NSC amid the ongoing personnel upheaval, according to two sources with direct knowledge of the matter. Some areas of the council are now lightly staffed, with both the Latin America and Africa sections lacking permanent senior directors as of last week.

The Signal controversy was not the only mark against Waltz in Trump's eyes, sources said.

A person familiar with the Cabinet's internal dynamics said Waltz was too hawkish for the war-averse Trump and was seen as not effectively coordinating foreign policy among a variety of agencies, a key role for the national security adviser.

Another source said Trump wanted to get to the 100-day mark in his term before firing a cabinet-level official.

Waltz's ouster could be of concern to U.S. partners in Europe and Asia who have seen him as supportive of traditional alliances such as NATO and tempering more antagonistic views toward them from some other Trump aides, according to one foreign diplomat in Washington who spoke on condition of anonymity.

Democrats who were outraged about the Signal scandal welcomed the news about Waltz.

"About time," said Democratic Senator Adam Schiff.

Source: Reuters

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Diana Wallace

Stocks

Shares of Meta Platforms (META 4.65%) are rising on Thursday. The company's stock gained 4.9% as of 12:46 p.m. ET, and gained as much as 8% earlier in the day. The leg up comes as the S&P 500 gained 0.9% and the Nasdaq Composite gained 1.9%.

The social media behemoth released its Q1 report after market close yesterday, beating Wall Street's already-high expectations.

Another strong quarter

The Facebook parent posted Q1 2025 earnings per share (EPS) of $6.43 on $42.3 billion in sales -- that's 35% EPS growth year over year (YOY) and 16% sales growth YOY. The figures came in well over Wall Street's targets. Meta's forecast revenue range of $42.5 billion to $45.5 billion for Q2 also beat expectations.

CEO Mark Zuckerberg emphasized the company's strong position despite macroeconomic uncertainty, particularly citing resilience in its advertising business and growth in AI. "We're making good progress on AI glasses and Meta AI, which now has almost 1 billion monthly actives," he said.

An AI spending spree

Meta significantly raised its capital expenditure forecast for 2025 to between $64 billion and $72 billion, a substantial increase from previous estimates. The spending growth is driven by the company's commitment to accelerate its AI programs and the infrastructure that enables them. Meta's ability to drive advertising revenue and efficiency with AI makes the technology extremely valuable to growth overall.

Meta is well-positioned

Meta continues to grow its active user base across its family of social media platforms, up 6% YOY. This, combined with the company's AI-driven efficiency, is leading to its incredible earnings growth. Its stock also remains one of the most reasonably priced among its mega-tech peers. I think Meta is a great pick.

Source: The Motley Fool

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Adam

Forex

The Australian dollar is in negative territory on Thursday. In the North American session, AUD/USD is trading at 0.6382, down 0.30% on the day.

Retail sales expected to improve

Australia's retail sales for March are projected to improve to 0.4% m/m, following a 0.2% increase in February. The retail sales report will provide a snapshot as to how well Australian consumers are coping with the turbulence from US President Trump's tariff policy. Consumers are being squeezed by the high cost of living and elevated interest rates.

Australians go to the polls on Saturday. The government jumped on the drop in first-quarter core CPI, which dropped to 2.9%, below the 3% upper band of the RBA's target band and supports the case for a rate cut. Australia's finance minister said that the RBA is expected to lower rates four or five times this year, which would save householders hundreds of dollars on mortgage payments.

US GDP, Core PCE Price Index decelerate

In the US, first-quarter GDP was a disappointment. The economy contracted by 0.3%, following a strong gain of 2.4% in the fourth quarter and missing the market estimate of 0.3%.

On the inflation front, the Core PCE Price index, the Fed's preferred inflation indicator, came in flat, down from a revised 0.5% in the previous release. This was the first time since Oct. 2020 that core PCE inflation has failed to post a gain. Annualized, the index fell to 2.3% from a revised 2.7%.

Next up is nonfarm payrolls on Friday, with the markets bracing for a sharp drop to 130 thousand, after a gain of 228 thousand a month earlier. With the markets on edge, a surprise reading could have a strong impact on the movement of the US dollar on Friday.

AUD/USD Technical

AUD/USD is testing support at 0.6392. Below, there is support at 0.6366

There is resistance at 0.6428 and 0.6454

Australian dollar eyes Aussie retail sales_1

AUDUSD 1-Day Chart, May 1, 2025

Source : marketpulse

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Adam

Economic

McDonald's has suffered its biggest drop in US sales since the height of Covid, a fall that it said was driven by wider concerns about the US economy.

The world's largest burger chain's revenue at US stores open at least a year sank 3.6% in the first three months of 2025 compared with the same period in 2024, as customers reduced their visits.

It marked the steepest decline in like-for-like sales in the US since the three months to the end of June 2020 when many pandemic restrictions were still in place.

Chief executive Chris Kempczinski said customers were "grappling with uncertainty" but assured investors that the firm could "navigate even the toughest of market conditions".

McDonald's has been working for months to try to re-ignite its business, after facing backlash from customers, especially lower income households, over rising prices.

The firm's latest drop in sales coincided with a contraction in the US economy, which shrank at an annual rate of 0.3% in the first three months of 2025.

It marked the first quarterly decline since 2022.

The figures reflected just over two months of Donald Trump's presidency - as many firms and consumers reacted with confusion to his barrage of tariff announcements - but not his "Liberation Day" tariff plans on 2 April

Over the same three-month period, the slump in McDonald's US sales dragged its overall like-for-like revenue down 1% even as sales in Japan, Australia, and the Middle East grew.

Mr Kempczinski said: "Consumers today are grappling with uncertainty, but they can always count on McDonald's [...] for exceptional value".

"McDonald's has a 70-year legacy of innovation, leadership, and proven agility, all of which give us confidence in our ability to navigate even the toughest of market conditions and gain market share," he added.

Higher prices

Businesses have had a mix of reactions since Trump began revealing and enforcing his plans for tariffs, which are a tax payable by a person or firm buying a good from overseas.

This week, technology giant Intel said costs would rise and a recession was more likely because of Trump's tariffs.

Sportswear brand Adidas said they would lead to higher prices in the US for popular trainers including the Gazelle and Samba.

Meanwhile, delivery giant DHL paused deliveries worth more than $800 (£603) due to US trade policy before lifting them after negotiating "adjustments" to customs rues.

Trump and his allies have said the policies will help to bring more jobs to the US as firms base factories and operations the country to avoid the new taxes.

However, many companies and economists have said this will be difficult to achieve and will likely mean job losses and economic pain at least in the short term.

Reacting to yesterday's economic figures, Trump said he needed "a little bit of time" - calling the numbers a reflection of the "Biden economy", a reference to the former president.

source :bbc

To stay updated on all economic events of today, please check out our Economic calendar

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Devin

Commodity

Economic

Profit taking and weak long liquidation from the shorter-term futures traders are featured. Silver prices are moderately down. A steep drop in crude oil prices this week is a bearish weight on gold and silver, as is a sharply higher U.S. dollar index today. June gold was last down $96.30 at $3,222.50. May silver prices were last down $0.366 at $32.165.

The next big U.S. data point is Friday morning’s U.S. jobs report for April from the Labor Department. That report may be the most important U.S. data point so far this year. The key non-farm payrolls number is seen coming in at up 133,000 versus a gain of 228,000 in the March report.

Many Asian and European stock markets were closed Thursday for the May Day holiday. U.S. stock indexes are solidly higher at midday. Risk appetite is keener late this week, following some better-than-expected U.S. corporate earnings reports that were released the past couple days. Also, the Trump administration is hinting that new trade deals with other countries are close at hand. Chinese media is reporting the U.S. has reached out to China to discuss trade.

The key outside markets today and see the U.S. dollar index sharply higher. Nymex crude oil futures prices are near steady and trading around $58.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently around 4.3%.

Technically, June gold futures bulls have the overall near-term technical advantage but are fading. Bulls’ next upside price objective is to produce a close above solid resistance at $3,350.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $3,100.00. First resistance is seen at $3,250.00 and then at $3,300.00. First support is seen at $3,200.00 and then at $3,175.00. Wyckoff's Market Rating: 6.5.

May silver futures bulls have the slight overall near-term technical advantage but are fading. A price uptrend on the daily bar chart has been negated. Silver bulls' next upside price objective is closing prices above solid technical resistance at this week’s high of $33.69. The next downside price objective for the bears is closing prices below solid support at $30.00. First resistance is seen at $32.00 and then at the overnight high of $32.555. Next support is seen at $31.50 and then at $31.00. Wyckoff's Market Rating: 5.5.

(Hey! My “Markets Front Burner” weekly email report is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. Plus, I’ll throw in an educational feature to move you up the ladder of trading/investing success. And it’s free! Sign up here; it’s real easy. https://www.kitco.com/services

Source: Kitco

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Commodity

Recent oil price movements and key triggers

Oil prices have experienced a significant decline over the past month, with Brent crude oil dropping to approximately $60.00 per barrel, a four-year low. This downturn is attributed to a combination of factors, including increased supply, weakening demand, and strategic decisions by major oil producers such as Saudi Arabia.

The decline represents a stark contrast to the market's performance earlier this year when prices were hovering closer to the $75.00 mark. This dramatic shift has caught many traders off-guard, particularly those who had positioned themselves for potential supply disruptions due to ongoing conflicts in the Middle East.

The speed of the decline has been particularly noteworthy, with Brent crude shedding more than 20% in just over four weeks. This rapid deterioration has triggered technical selling, compounding the downward pressure on prices.

Market volatility has increased significantly, with daily price swings of 2-3% becoming common. This environment has created both challenges and opportunities for oil traders, depending on their positioning and risk management strategies.

OPEC+ dynamics and Saudi Arabia's strategic shift

Saudi Arabia, traditionally a proponent of production cuts to stabilise prices, has shifted its stance. Frustrated by OPEC+ members like Kazakhstan and Iraq exceeding production quotas, Riyadh has signalled a willingness to tolerate lower oil prices and has even pushed for an unexpected output hike in May. This move has contributed to the oversupply in the market, exerting downward pressure on prices.

Saudi Arabian officials have been informing allies and industry experts that the kingdom is no longer willing to support the oil market through additional supply cuts and is prepared to endure a prolonged period of low prices, according to five sources familiar with the discussions. This potential policy shift suggests that Saudi Arabia may increase production to expand its market share, marking a significant change after five years of leading the OPEC+ group in deep output cuts to balance the market.

This strategic pivot indicates a departure from Saudi Arabia's previous approach of defending high oil prices. By signalling a tolerance for lower prices, the kingdom appears to be prioritising market share expansion over price stabilisation. This move could have far-reaching implications for global oil markets, potentially leading to increased competition among producers and influencing future OPEC+ policy decisions.

The timing of this shift is particularly notable as it coincides with increasing production from non-OPEC sources, including record-high output from the United States and growing production from Guyana and Brazil.

Global economic concerns weighing on demand

Economic indicators suggest a slowdown in global demand for oil. The US economy contracted by 0.3% in the first quarter of 2025, raising fears of a potential recession. This contraction was driven primarily by a surge in imports ahead of newly implemented tariffs, which also contributed to a record-high trade deficit. Additionally, concerns about China's economic growth have further dampened demand expectations.

China's economic performance has been particularly disappointing, with industrial production growing at its slowest pace in six months and property sector woes continuing to drag on overall economic activity. As the world's largest oil importer, any slowdown in Chinese demand has outsized effects on global oil markets.

European economies aren't faring much better, with the eurozone struggling to gain momentum after narrowly avoiding recession last year. High interest rates continue to weigh on business activity, while consumer spending remains subdued despite moderating inflation.

These demand concerns have coincided with the seasonal transition from winter to spring, a period when refinery maintenance typically reduces crude oil demand. This seasonal factor has exacerbated the downward pressure on prices at a time when the market was already vulnerable.

Saudi Arabia's financial resilience and strategic calculations

Saudi officials have indicated that the kingdom can sustain a prolonged period of low oil prices. This strategy may be aimed at regaining market share from non-OPEC producers like the US and Guyana or disciplining non-compliant OPEC+ members. The kingdom is prepared to weather the downturn through increased borrowing and spending cuts, potentially delaying major projects.

The kingdom's finances are in a stronger position than during previous oil price downturns, with substantial foreign reserves of approximately $415 billion. This financial buffer provides Saudi Arabia with the flexibility to withstand lower oil revenues for an extended period.

Crown Prince Mohammed bin Salman's ambitious Vision 2030 programme, which aims to diversify the Saudi economy away from oil dependence, may face challenges if oil prices remain depressed. However, Saudi officials have indicated that core components of the programme will proceed regardless of oil price fluctuations.

The strategic calculations behind Saudi Arabia's apparent willingness to accept lower prices likely also include geopolitical considerations, particularly regarding its relationship with Russia within the OPEC+ framework and its complex ties with the United States.

Market structure and futures trading dynamics

The oil market is experiencing unusual dynamics, characterised by a peculiar futures curve known as "contango," where future prices are higher than current prices. This typically signals bearish sentiment and encourages stockpiling. Despite recent bearish indicators - including increased oil production by OPEC+ and trade tensions between the US and China impacting demand - the futures curve's complex shape suggests a more nuanced outlook.

This contango structure creates incentives for traders to buy and store physical oil, potentially leading to increased inventories. Reports already indicate that floating storage - oil stored on tankers - has begun to increase as traders take advantage of the price differential between current and future months.

The commodity options market is also signalling increased bearish sentiment, with put options (which profit from price declines) seeing increased demand. The put-call skew has shifted notably toward puts in recent weeks, indicating that traders are paying a premium for downside protection.

Speculative positioning in the futures market has turned increasingly bearish, with hedge funds and other money managers reducing their net long positions to the lowest level in more than a year. This positioning could exacerbate price movements in either direction, depending on how market fundamentals evolve.

Implications for major economies and oil companies

The drop in oil prices presents a mixed picture for major economies. For oil-importing nations, lower prices act as a tax cut for consumers and businesses, potentially stimulating economic activity. However, for oil-exporting countries, the revenue shortfall can strain government budgets and economic stability.

The United States, as both a major producer and consumer of oil, faces complex implications. Lower prices benefit consumers through reduced fuel costs but put pressure on the domestic shale industry, which generally requires higher oil prices to remain profitable. Any significant curtailment of US production could eventually help rebalance the market.

Major oil companies are likely to reassess their capital expenditure plans if prices remain depressed. We've already seen announcements from several companies indicating they will prioritise cost control and focus on the most profitable projects in their portfolios.

Renewable energy initiatives might face headwinds as lower oil prices reduce the economic incentive to transition away from fossil fuels. However, most governments and major corporations have made long-term commitments to decarbonisation that transcend short-term oil price fluctuations.

Technical analysis of the oil price

WTI light crude oil is trading in four-year lows, having fallen through its 2021-to-2025 $65.25-to-$61.76 key support zone in April.

The June-to-October 2019 lows at $51.03-to-$50.63 represent possible downside targets, together with the psychological $50.00 mark and the 61.8% Fibonacci retracement of the 2020-to-2022 bull market at $49.52.

WTI crude oil monthly chart

Because of inverse polarity the previous $65.25-to-$61.76 major support zone should now act as a resistance area.

The Brent crude oil price, down over 25% from its early January high at $81.73 per barrel, and down 20% in the past month alone, continues to slide and is fast approaching its April low at $58.17. Failure there may well lead to the $55.00-to-$53.00 region being hit.

Brent crude oil daily chart

Strong resistance sits between the September 2024 and March 2025 lows and the late April high at $67.39-to-$68.46. While this resistance area caps, the downtrend remains entrenched.

How to trade falling oil prices

For traders and investors, the current oil market presents both risks and opportunities across various time horizons. Here's how you can navigate this volatile environment:

Research the oil market thoroughly, including supply-demand dynamics, technical indicators, and geopolitical factors that could impact prices.

Choose whether you want to trade or invest based on your outlook for oil prices and your preferred time horizon.

Open an account with IG by visiting our website and completing the application process.

Search for oil markets like 'Brent Crude' or 'WTI' on our trading platform or app.

Place your trade, ensuring you have appropriate risk management measures in place, especially important in the current volatile environment.

Spread betting and CFD trading offer ways to potentially profit from both rising and falling oil prices, allowing flexible positioning as market conditions evolve. These products enable traders to take advantage of oil's volatility without needing to take physical delivery.

For those with a longer-term outlook, ETFs tracking oil prices or energy sector equities provide exposure to the broader energy market trends. The diversification offered by these instruments can help mitigate some of the risks associated with individual oil company stocks.

The current decline in oil prices reflects a complex interplay of supply-side decisions, demand-side concerns, and strategic manoeuvres by key players like Saudi Arabia. While the short-term outlook remains bearish, market dynamics could shift rapidly in response to geopolitical developments, economic indicators, and policy decisions by major oil-producing nations.