S&P 500 Rally Defies Trade Fears as May Ends with Gains

The S&P 500 rally capped off its most impressive monthly performance since late 2023, even as concerns over U.S.-China trade relations resurfaced and rattled investor sentiment. While Friday’s session was marked by choppy price action, the broader market held its ground after a week of heightened volatility triggered by fresh tariff threats and political uncertainty.

Markets were unsettled after President Donald Trump accused China of “totally violating” its trade deal with the U.S. — a vague but inflammatory remark that sent risk assets briefly lower. The remarks came shortly after a federal court reversed a prior decision and temporarily reinstated sweeping tariffs on Chinese goods.

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Tariff Threats and Tech Sanctions Unnerve Investors

Additional pressure came from reports that the White House is considering broadening technology-related sanctions on Chinese firms. Bloomberg cited sources suggesting that new licensing requirements could soon target transactions involving companies majority-owned by already-sanctioned Chinese entities. The news sparked an afternoon sell-off, with the S&P 500 and Nasdaq falling up to 1.1% and 1.7%, respectively, before rebounding into the close.

White House officials, including Deputy Chief of Staff Stephen Miller, confirmed that further trade actions are being drafted. Although the administration has a history of intense rhetoric followed by partial reversals, investors are growing cautious about the unpredictable direction of policy.

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Traders Adopt a Skeptical Stance as Markets Absorb Shock

Despite the sharp intraday moves, the market’s overall reaction remained relatively contained. Analysts pointed to what traders are calling the “TACO” trade — short for Trump Always Chickens Out — suggesting a growing belief that the administration may once again pull back from full implementation of its threats.

Still, the lack of clarity surrounding U.S. trade policy continues to create friction, especially in export-heavy sectors and global tech. As geopolitical risks escalate, risk appetite remains highly sensitive to headlines.

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S&P 500 Rally and Nasdaq Surge Defy Macro Headwinds

For investors who remained in the market throughout May, returns were substantial. The S&P 500 rally pushed the index more than 6% higher — its best monthly showing since November 2023, and its strongest May performance since 1990. The Nasdaq outpaced even that, jumping approximately 9.5% during the month, also its best performance since November.

The Dow Jones Industrial Average ended Friday’s session up by 54 points (0.13%) after a volatile day. The S&P 500 slipped marginally by 0.01%, while the Nasdaq Composite dropped 0.32% amid renewed selling in tech shares.

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Inflation, Tariffs, and Global Uncertainty Keep Markets on Edge

Even with these gains, Wall Street faces a complex landscape. Economic data remains mixed. Weekly jobless claims and GDP figures released Thursday failed to inspire confidence, while the market now awaits the Fed’s preferred inflation metric — the Personal Consumption Expenditures (PCE) report. Forecasts suggest core PCE rose by 2.2% in April, down slightly from March’s 2.3%.

Meanwhile, concerns over global debt levels and poor demand for long-term U.S. and Japanese bonds have added another layer of pressure to global sentiment.

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UBS: Volatility Isn’t Going Anywhere Soon

Commenting on the market outlook, Ulrike Hoffmann-Burchardi, Chief Investment Officer for global equities at UBS Global Wealth Management, warned that investors should prepare for further turbulence.

“We expect bouts of market volatility ahead as investors continue to navigate a range of market, economic and geopolitical risks,” she wrote in a Thursday note to clients.

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S&P 500 Rally Highlights Market Resilience, but Clouds Remain

Despite a backdrop of trade uncertainty, tech policy friction, and looming inflation concerns, the S&P 500 rally demonstrates that investor appetite for equities remains strong — for now. Whether this momentum can continue into the summer will depend on how the Fed responds to inflation data, and whether the White House chooses escalation or restraint in its trade war narrative.