The financial markets have been a whirlwind of activity this week, with major US stock market benchmarks—the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite—navigating a volatile, choppy session to ultimately close near their session highs.

The Dow gained 284.97 points (0.70 per cent) to close at 41,113.97, the S&P 500 climbed 24.37 points (0.43 per cent) to 5,631.28, and the Nasdaq added 48.50 points (0.27 per cent) to 17,738.16. This late-session rally came amidst a barrage of high-impact catalysts that kept investors on edge: US-China trade talks slated for this weekend in Switzerland, the Federal Reserve’s decision to hold interest rates steady, President Trump’s plan to roll back Biden-era restrictions on artificial intelligence chips, and a steep 7.5 per cent selloff in Alphabet shares due to concerns over declining Google search volumes.

Beyond the stock market, central banks made headlines with contrasting moves—the Fed maintaining its cautious stance while the People’s Bank of China (PBOC) slashed rates to stimulate its economy.

Meanwhile, in the cryptocurrency realm, Bitcoin soared past US$99,000, inching closer to the US$100,000 milestone, while Ethereum’s much-hyped Pectra upgrade failed to ignite immediate enthusiasm. I see a market teetering between opportunity and uncertainty, shaped by geopolitical tensions, monetary policy decisions, and shifting investor sentiment.

Stock market performance and catalysts

Let’s dive into the US stock market’s rollercoaster session. The major benchmarks’ ability to close near their highs despite intraday volatility speaks to the resilience of investor confidence, albeit tempered by unease. One of the day’s biggest drivers was the surge in chipmakers, catalysed by news that the Trump administration intends to rescind Biden-era curbs on AI chip exports.

The PHLX Semiconductor Index, a barometer for the sector, rose 1.7 per cent after an earlier dip of one per cent, reflecting a late rally in stocks like Nvidia and AMD. This policy shift could unlock significant growth for the US tech sector, which has been hamstrung by restrictions aimed at limiting China’s access to advanced technology. However, the broader market’s choppiness suggests that investors remain wary of other headwinds.

The most anticipated news was the announcement that US and Chinese officials, including Treasury Secretary Scott Bessent and trade negotiator Jamieson Greer, will meet in Switzerland this weekend to discuss trade. Initially, this sparked optimism that the long-standing US-China trade war might see a thaw, especially given Trump’s recent 145 per cent tariffs on Chinese imports.

However, Bessent quickly dampened expectations, telling Reuters that these would not be “advanced” discussions. His realism—or perhaps pessimism—echoes China’s guarded response, with a foreign ministry spokesperson citing a proverb about actions speaking louder than words.

For context, the trade war has disrupted global supply chains, driving up costs and stoking inflation fears. Walmart CEO Doug McMillon recently warned of potential product shortages if tariffs persist, a sentiment shared by many corporate leaders. From my perspective, this weekend’s talks are a critical juncture, but the lack of concrete progress signals more volatility ahead as markets grapple with uncertainty.

Another key factor was the Federal Reserve’s decision to keep interest rates unchanged at 4.25–4.50 per cent for the third consecutive meeting, aligning with market expectations. Fed Chair Jerome Powell, in remarks, acknowledged that the US economy continues to grow at a solid pace, though swings in net exports—likely tied to trade disruptions—have clouded the data.

The Fed’s statement flagged rising risks of inflation and unemployment, particularly due to Trump’s tariff policies. Powell’s cautious tone, emphasising the need for more data before signalling rate cuts, disappointed some investors hoping for dovish hints.

LSEG data suggests markets still anticipate a 25-basis-point cut by July, but the Fed’s focus on tariff-driven inflation risks complicates that outlook. I see the Fed walking a tightrope: easing too soon could fuel inflation, while holding firm might choke growth if trade tensions escalate. This limbo is likely to keep markets jittery.

Alphabet’s sharp 7.5 per cent drop added to the session’s turbulence. Reuters reported that the selloff stemmed from concerns about declining Google search volumes, a critical metric for the tech giant’s revenue. This stumble dragged down the broader tech sector, highlighting how even industry titans face scrutiny in a rapidly evolving digital landscape.

Juxtaposed with the chip sector’s gains, Alphabet’s woes underscore the uneven performance within tech, driven by policy shifts and competitive pressures. As a journalist, I view this as a reminder that market leaders aren’t invincible, especially as AI and other innovations challenge established business models.

Investor behaviour and corporate strategy

Investor sentiment has shifted noticeably amid these developments. Bank of America’s weekly flow data, cited by CNBC, revealed that investors yanked US$8.9 billion out of US equities last week—the largest outflow since March—while funnelling US$7.8 billion into foreign stocks. This pivot suggests growing unease about US market valuations and the potential fallout from trade wars.

At the same time, US companies are planning a record US$500 billion in stock buybacks, according to the Financial Times, as tariff uncertainty stalls capital investment. Buybacks can prop up share prices in the short term, but they also signal a defensive mindset, with firms opting to reward shareholders rather than bet on expansion in a shaky environment.

This trend reflects a broader wait-and-see approach. If trade tensions ease, those funds could shift toward growth initiatives, potentially sparking a rally. For now, though, caution reigns.

Central bank actions

On the monetary policy front, central banks offered contrasting narratives. The Fed’s decision to hold steady reflects a steady-hand approach, balancing solid US growth against inflationary pressures from tariffs. Across the Pacific, the People’s Bank of China took a more aggressive tack, cutting its seven-day reverse repo rate from 1.5 per cent to 1.4 per cent and lowering the reserve requirement ratio by 0.5 per cent effective May 15, per Bloomberg.

These moves aim to counter US tariff pressures and bolster China’s economy, which faces deflation, a property crisis, and slowing growth. The PBOC also signalled regulatory flexibility for tariff-hit firms and encouraged equity investments by insurance funds, rounding out a multi-faceted stimulus package.

China’s actions are a pragmatic response to external shocks, but their success depends on whether global trade stabilises. If US-China talks falter, this stimulus might not fully offset the tariff drag, with ripple effects for global markets.

Cryptocurrency trends

The cryptocurrency space provided a stark contrast to traditional markets, with Bitcoin surging past US$99,000 late Wednesday, hitting $99,027.83 as of 11:47 p.m. ET, per CoinDesk. This milestone in its 2025 bull run—just shy of the psychologically significant $100,000 mark—cements Bitcoin’s status as the year’s top-performing major asset.

Several factors are fuelling this rally. Institutional momentum is a big driver: BlackRock’s IBIT spot Bitcoin ETF has outpaced the SPDR Gold Trust in year-to-date inflows, while firms like Japan’s Metaplanet and US-based Strategy (formerly MicroStrategy) continue aggressive BTC accumulation.

Bitcoin’s realised capitalisation has also hit a record US$890 billion, reflecting growing confidence among long-term holders. Macro tailwinds, including expectations of future Fed rate cuts, further bolster its appeal as a hedge against inflation and currency devaluation.

Ethereum, however, painted a different picture. Its widely anticipated Pectra upgrade, activated Wednesday, failed to spark immediate excitement. ETH rose a modest 0.96 per cent, with trading volume inching up just 0.52 per cent over 24 hours. This muted response contrasts sharply with Bitcoin’s surge, highlighting their divergent roles: Bitcoin as a store of value, Ethereum as a platform for smart contracts.

I see Bitcoin’s rally as proof of its maturation as an asset class, embraced by institutions and retail investors alike. Ethereum’s lackluster reaction suggests that its technological upgrades, while promising, need time to translate into market momentum.

My take

Stepping back, the financial landscape feels like a high-stakes chess game, with each move—whether by governments, central banks, or investors—carrying outsized implications. The US stock market’s resilience amid choppy trading reflects a tug-of-war between optimism (chip policy relief, potential trade progress) and anxiety (tariffs, inflation risks).

The Fed’s steady hand contrasts with China’s stimulus push, illustrating how global economies are responding to shared pressures in distinct ways. Investor flight from US equities and the surge in buybacks signal a defensive crouch, while Bitcoin’s ascent underscores a hunger for alternative assets in an uncertain world.

In my view, the US-China talks this weekend are the linchpin. A breakthrough could calm markets and redirect corporate funds from buybacks to investment, fueling growth. But Bessent’s tempered outlook and China’s reticence suggest a slog ahead, keeping volatility high.

The Fed’s caution makes sense given tariff-driven inflation risks, though it risks lagging if the economy softens. China’s rate cuts are a bold play, but their impact hinges on global trade dynamics. And in crypto, Bitcoin’s dominance is clear, though Ethereum’s slow burn could pay off long-term as its upgrades mature.

I’ll be watching how these threads—trade, policy, and innovation—unravel in the weeks ahead. For now, the markets are a crucible of uncertainty and opportunity, and investors are navigating it with a mix of boldness and caution that’s fascinating to witness.

 

Source: https://e27.co/navigating-market-volatility-bitcoin-hits-us99k-us-stocks-rally-amid-trade-talks-and-fed-decisions-20250508/