Opening Bell - Morning Commentary

U.S. Markets Retreat as Investors Reassess Recent Optimism

U.S. equity markets closed modestly lower Tuesday during a session marked by minimal economic data releases. The pullback follows a robust rebound over the past month, prompting investors to question the sustainability of recent optimism fuelled by apparent easing in trade tensions and inflation concerns.

Technology stocks have been the primary drivers of recent market gains and have experienced broad declines. Industry leaders Nvidia, Apple, and Microsoft all closed in negative territory. The sector dropped 0.5% as investors locked in profits following the extended rally and sentiment shifted amid renewed macroeconomic uncertainties.

Notable movements within the S&P 500 included a sharp decline in FICO shares following heightened regulatory scrutiny, while Moderna surged on favourable vaccine guidance. Defensive sectors, including healthcare and consumer staples, outperformed the broader market, reflecting investors' increasing preference for safer assets amid growing economic uncertainty.

Over recent weeks, easing trade tensions and persistently robust economic data have fuelled a remarkable 20% rally in the S&P 500 since its April 8 low. U.S. small- and mid-cap equities have exhibited powerful momentum during this period, with the Russell Mid-cap Index advancing 21% since April 8, while the Russell 2000 Index, which tracks smaller companies, has gained 19.5% from its recent bottom. This balanced performance across market segments suggests a broad-based economic recovery rather than one concentrated in a few large companies.

Despite the temporary suspension of specific U.S.-China tariffs, investors continue to doubt the longevity of trade relief measures. Additional concerns centre around President Trump's proposed tax cuts, which critics suggest could significantly increase the federal deficit. Market apprehension intensified as major retailers like Walmart cautioned about potential price increases, further stoking inflation worries.

Oil prices jumped more than 1% on Wednesday following reports that Israel is preparing to strike Iranian nuclear facilities, heightening concerns that conflict could disrupt supply chains in the critical Middle East production region.

Asia-Pacific equities advanced today despite Wall Street ending its six-day winning streak. Stock benchmarks in Japan, South Korea, and Australia gained ground, pushing a broader index of regional shares up 0.4% in early trading.

Indian equity benchmarks declined sharply yesterday amid reports of increasing COVID-19 cases in Southeast Asian countries like Singapore and Hong Kong. The Nifty fell for the third consecutive session, shedding 261 points (1.05%) to close at 24,683, while the BSE Sensex dropped 873 points (1.06%) to 81,186.

Japanese bond sell-off has elevated borrowing costs, contributing to global market uncertainty and dampening risk appetite.

Technically, Nifty closed below its 5-day EMA for the first time since May 8, 2025, suggesting a shift to profit-booking. Support levels lie at 24,494 and 24,378, while resistance is expected in the 24,800-24,900 range.

In the absence of strong global cues, Indian markets are likely to pick up from where they left off yesterday.