Markets extended Monday’s rally as easing US-China trade tensions and a surge in semiconductor names lifted broader sentiment. The S&P 500 rose for a second straight session and erased its year-to-date losses, closing at its highest level since early March. Nvidia led the charge on news of a major chip shipment to Saudi Arabia, while softer inflation data added fuel to the rally. Although the Dow lagged due to a steep decline in UnitedHealth, bullish momentum across tech and risk assets carried the overall tone. Investors appeared increasingly optimistic that tariff relief and cooling price pressures could reignite economic confidence.

Key Takeaways:

  • S&P 500 Reverses 2025 Losses: The S&P 500 climbed 0.72% to close at 5,886.55, extending Monday’s rally and turning positive for the year. The index has now recovered more than 17% from its April low.
  • Nasdaq Rallies on Tech Strength: The Nasdaq Composite surged 1.61% to 19,010.08 as Nvidia and other chipmakers posted strong gains. Tuesday’s move marked the index’s third consecutive advance, bringing its two-day gain to nearly 6%.
  • Dow Slips as UnitedHealth Plunges: The Dow Jones Industrial Average fell 269.67 points, or 0.64%, to 41,839.38. A nearly 18% drop in UnitedHealth shares weighed on the blue-chip index after the company suspended its 2025 outlook and announced the CEO’s sudden departure.
  • Europe Edges Higher on Trade Reprieve and Strong Earnings: European equities finished mixed after Monday’s rally, with investors weighing tariff relief against macro and earnings developments. Germany’s DAX rose 0.31% after the ZEW economic sentiment index bounced to 25.2 in May from -14, far beating forecasts. France’s CAC 40 added 0.30%, supported by broad industrial gains. Italy’s FTSE MIB climbed 0.8% for a fourth straight session, nearing a 17-year high. The Stoxx 600 advanced 0.07%, led by a 9.2% jump in Vestas on strong revenue. Bayer rose 3% on solid earnings, while Munich Re fell 4.3% on wildfire-related claims. The UK’s FTSE 100 ended flat as March wage growth slowed to 5.6% and payrolls declined for a second straight month, reflecting pressure from higher taxes and minimum wage costs.
  • Asia Mixed as Investors Digest China Tariff Breakthrough: Asia-Pacific markets saw divergent moves as investors responded to the unexpected 90-day tariff pause. Japan’s Nikkei 225 gained 1.43%, marking its fourth consecutive rise, while the broader Topix posted a 13th straight advance. Australia’s ASX 200 rose 0.43%, and South Korea’s Kospi ended flat with small-cap Kosdaq adding 0.89%. China’s CSI 300 rose 0.15% amid renewed confidence, while Nomura upgraded Chinese stocks to “tactical overweight.” However, Hong Kong’s Hang Seng dropped 1.87% and India’s Nifty 50 slid 1.36% as investors locked in profits. India’s inflation eased to 3.16%, its lowest in six months, but equities reversed gains after a major prior-day rally.
  • Oil Rises Over 2.5% on Trade and CPI Boost: Oil prices continued their rebound, supported by the 90-day tariff pause and lower-than-expected US inflation. Brent settled at $66.63, up 2.57%, while WTI gained 2.78% to $63.67. The move builds on Monday’s sharp rally, though gains may be capped as OPEC+ prepares to raise exports in the coming months. Saudi supply to China will remain high after a recent output boost.
  • US Inflation Eases to 2.3% in April: The US consumer price index rose 2.3% year over year in April, slightly below the expected 2.4%. Core CPI met expectations at 2.8%. The softer reading eased investor concerns and added to hopes that the Fed could pivot sooner if disinflation persists. Shelter drove most of the gain, while food and energy were mixed.
  • 10-Year Yield Inches Higher Despite Light CPI: The 10-year Treasury yield rose 2.4 basis points to 4.481%, while the 2-year yield was little changed at 4.011%. While inflation slowed in April, bond traders remain cautious as the full impact of the latest tariffs may not surface until summer. Fed expectations remain fluid, though slower inflation adds policy flexibility.

FX Today:

  • EUR/USD Breaks Below Support, Eyes 50-Day SMA: EUR/USD declined 0.33% to close at 1.1087, extending its recent correction from the April high of 1.1570. The pair has now broken through the 1.1200 pivot and is testing its 50-day SMA at 1.1067. This level is critical for preserving the bullish trend structure that began in March. Despite the drop, major moving averages remain upward sloping, reinforcing broader uptrend potential. However, momentum has turned bearish in the short term. If support at 1.1067 fails, the next levels to watch are 1.1000 and 1.0900. To the upside, reclaiming 1.1200 and then 1.1350 would be needed to reassert bullish control. Until then, the pair remains vulnerable to further downside pressure.
  • GBP/USD Falls Below 1.3200 as Momentum Weakens: GBP/USD dropped 0.70% to settle at 1.3142, slipping beneath the key 1.3200 support zone and signalling weakening short-term momentum. The pair had consolidated near the April highs of 1.3450, but sellers gained traction as bullish conviction faded. While the broader trend remains constructive with the 50-day, 100-day, and 200-day SMAs all pointing higher, the current retreat raises the risk of a deeper correction. Immediate support lies at 1.3100–1.3080, followed by 1.3000. On the upside, bulls would need to retake 1.3200 to restore upward momentum. A close below the 50-day SMA at 1.3090 would further challenge the trend’s durability.
  • AUD/USD Slides Toward Support After 200-Day Rejection: AUD/USD fell 0.47% to 0.6359 after failing to break above the 200-day SMA at 0.6455. The pair is now approaching the 100-day SMA at 0.6284, with the 50-day at 0.6232 still trending higher. April’s rally has lost momentum as repeated failures near 0.6450 weigh on sentiment. If price breaks below 0.6300, stronger support lies near 0.6280 and 0.6230. A drop below those levels would open the path toward 0.6150 and threaten the broader recovery trend. Conversely, a bounce back above 0.6400 could reignite upside interest. 
  • USD/JPY Retreats After Test of Resistance Zone: USD/JPY closed at 147.40, down 0.71%, after pulling back from an intraday high of 148.45. The pair has been climbing since late April, reclaiming the 50-day SMA at 146.24, but is now struggling to clear the 100-day and 200-day SMAs at 150.28 and 149.56. The resistance band between 148.50–149.50 remains a key barrier. Immediate support lies at 146.00 and then 144.00, where bulls previously defended. A break above 150.00 would signal a broader trend reversal, but failure to hold above 145.50 could invite renewed selling pressure. 
  • Gold Recovers After Intraday Dip, Holds Near $3,250: Gold (XAU/USD) gained 0.40% to close at $3,249.11, rebounding from an intraday low of $3,216.06. The precious metal continues to consolidate within a bullish structure after retreating from April’s peak near $3,500. Technical support remains strong above the 50-day SMA at $3,144.78, with the 100-day and 200-day SMAs at $2,960.18 and $2,783.61 respectively, all rising steadily. Tuesday’s bounce showed buyers defending the $3,215 level, which has repeatedly held as support. Resistance remains at $3,300–$3,350, with a break above likely triggering a retest of the highs. A sustained move below $3,200 would risk a deeper pullback, but the uptrend remains intact above the 50-day average.

Market Movers:

  • Nvidia Rallies on Saudi AI Chip Deal: Nvidia (NVDA) surged more than 5% after reports the company will deliver 18,000 of its top-tier AI chips to Saudi Arabia. The announcement boosted investor confidence in ongoing global demand for high-end semiconductors.
  • Coinbase Soars on S&P 500 Inclusion: Coinbase Global (COIN) jumped more than 23% after S&P Dow Jones Indices confirmed the company will join the S&P 500 before May 19. The move signals growing institutional acceptance of crypto-linked equities.
  • Super Micro Surges on Analyst Coverage: Super Micro Computer (SMCI) closed up more than 15% after Raymond James initiated coverage with an “outperform” rating and a $41 price target, citing long-term upside potential tied to AI infrastructure demand.
  • Palantir Pops on Bullish Rating: Palantir Technologies (PLTR) gained over 8% following a buy rating and $142.30 price target from CTBC Securities Investment Service. The report highlighted accelerating demand for enterprise AI solutions.
  • ON Holding Jumps on Strong Sales Beat: ON Holding (ONON) rose more than 11% after reporting Q1 net sales of CHF726.6 million ($862.8 million), well above analyst forecasts. The strong revenue beat reflected robust global demand.
  • UnitedHealth Crashes After CEO Exit: UnitedHealth Group (UNH) plunged more than 17%, leading health insurance stocks lower. The company suspended its 2025 guidance and announced the immediate resignation of CEO Andrew Witty, citing personal reasons. Rising medical cost projections also weighed.
  • Simon Property Group Slides on Outlook: Simon Property Group (SPG) fell more than 6% after issuing full-year FFO guidance of $12.40 to $12.65, with the midpoint below analyst consensus. Weaker mall traffic and retail pressures contributed to the cautious forecast.

Markets continued their rebound on Tuesday as soft inflation data and easing US-China trade tensions fuelled risk appetite. Tech stocks remained in focus, with Nvidia’s international chip deal energising the broader AI sector and helping the S&P 500 reclaim its 2025 gains. While the Dow underperformed due to weakness in health care, broader sentiment stayed positive amid hopes for policy support and improving macro data. Looking ahead, investors will monitor further inflation signals, Fed commentary, and any new developments on trade to assess whether the rally has lasting power.