Stocks Are Wavering After Three-Day Rally

The stock market’s recent volatility has been nothing short of dramatic. After a steep sell-off on April 22, 2025, triggered by political and policy uncertainty, markets staged a sharp rebound the following day only to drift back into uncertainty by April 24. This three-day rollercoaster underscores the fragile state of investor confidence amid escalating geopolitical risks and shifting monetary policy dynamics. Let’s dissect what drove the swings—and what lies ahead.

The Three-Day Volatility Cycle

April 22: A Day of Doubt
The week began with a selloff fueled by President Trump’s public criticism of Federal Reserve Chair Jerome Powell. On Truth Social, Trump accused Powell of being “Mr. Too Late” and warned the economy would stagnate unless the Fed cut rates. These remarks, paired with lingering fallout from Trump’s “reciprocal” tariffs on China announced weeks earlier, sent stock futures plunging. By day’s end, the Dow had fallen 970 points (its fourth consecutive loss), while the S&P 500 and Nasdaq each slumped over 2%.

April 23: Rally on Powell Retention
Markets rebounded sharply after Trump clarified he had “no intention” of firing Powell before his term ends in 2026. Stock futures surged overnight: the Dow gained 500 points, and S&P 500 futures rose 1.4%. Further relief came as Trump signaled final tariffs on China would be “nowhere near 145%,” easing trade war fears. By day’s close, the S&P 500 had clawed back 2.5%, nearly reversing April 22’s losses.

Asia-Pacific markets mirrored this optimism: Hong Kong’s Hang Seng Index jumped 2.37%, while Taiwan’s tech-heavy index soared 3.9% as investors bet on tariff de-escalation.

April 24: Lingering Uncertainty
The rally faltered on April 24 as investors weighed mixed signals. Earnings disappointments from Tesla and Enphase Energy—a 12% drop for Enphase after weak guidance—and ongoing tariff risks kept markets cautious. Fed officials, including Vice Chair Philip Jefferson, gave speeches that offered no immediate clarity on monetary policy.

By session’s end, the S&P 500 hovered near breakeven, underscoring the fragility of the recovery.

What’s Driving the Volatility?

1. Policy Uncertainty
   Trump’s attacks on the Fed and threats to fire Powell have eroded confidence in central bank independence. The White House’s consideration of removing Powell—a move under legal scrutiny—has amplified fears of erratic monetary policy.

2. Trade Tensions
   The April 2 tariffs, which initially caused a 9% decline in the S&P 500, remain unresolved. While a 90-day pause in late April provided temporary relief, the threat of a 104% tariff ceiling on Chinese goods lingers. Analysts note that 34% of S&P 500 companies now cite tariffs as a risk in their earnings reports—a 200% increase from early 2024.

3. Earnings Disappointments
   Sector-specific risks have added to volatility. Tesla’s Q1 miss—a $0.27 EPS versus the expected $0.39—and Intuitive Surgical’s margin warnings due to tariffs highlight how macroeconomic headwinds are hitting companies.

The Data Behind the Swings

• Volatility Clusters: The S&P 500’s 2.4% drop on April 22 was nearly matched by its 2.5% rebound on April 23, a pattern consistent with historical “volatility clusters” where sharp declines are often followed by swift recoveries.
• Tariff Impact: Since April 2, the S&P 500 has lost $6.5 trillion in value—a 12.5% decline from its February peak.
• Safe-Haven Demand: Gold hit a record $3,510 per ounce on April 23, while the VIX (volatility index) dropped to 29.65—a “bear killer” signal historically linked to market bottoms.

Conclusion: Navigating the Volatility

The three-day rally-to-stall pattern underscores a critical truth: investor sentiment remains hostage to policy decisions and geopolitical posturing. While Trump’s clarification on Powell and tariff de-escalation signals provided temporary relief, the market’s long-term stability hinges on resolving these uncertainties.

Historical context offers clues: the VIX’s “bear killer” signal (triggered when it drops below 30 after spiking above 50) has preceded average S&P 500 gains of 17.9% over 12 months in past crises. However, this cycle is unique—tariffs and trade wars are now structural risks, not cyclical ones.

For investors:
- Stay diversified: Allocate to sectors insulated from tariffs, such as healthcare or utilities.
- Avoid knee-jerk reactions: The market’s best days often follow its worst (e.g., its 9.5% surge on April 9).
- Monitor Powell’s tenure: If the Fed’s independence is preserved, volatility could ease.

The path forward is clear: until policy and trade risks are resolved, expect more rollercoaster rides.

This analysis synthesizes the provided research to highlight the interplay of political, economic, and market forces shaping this volatile period. The data-driven insights and historical parallels provide a roadmap for navigating uncertainty—a hallmark of effective investment strategy in turbulent times.