The New SEC Era and the Market's Fragile Rally: What Investors Need to Know

The U.S. stock market surged for a third consecutive session on April 24, 2025, with the S&P 500 climbing 1.3% midday as investors digested mixed corporate earnings and cautiously optimistic signals from Washington. Yet beneath the surface, the rally faces headwinds tied to a regulatory reset under SEC Chair Paul Atkins and unresolved trade tensions. Here’s why the path forward remains fraught with uncertainty—and opportunity.

The Rally, Explained—and Its Limits

The midday gains were propelled by strong earnings from tech and AI-driven companies like ServiceNow (+14% after reporting robust subscription growth), while sectors facing tariff-related headwinds stumbled. PepsiCo’s shares fell 2.9% as it cited a 25% U.S. aluminum tariff as a cost burden, and Procter & Gamble dropped 5% due to $200 million in commodity inflation.

The bond market mirrored this duality: the 10-year Treasury yield dipped to 4.32%, reflecting reduced inflation fears but also lingering doubts about economic durability.

The Atkins Effect: A Regulatory Pivot

The market’s optimism is also tied to Paul Atkins’ confirmation as SEC Chair, which the NYSE President Lynn Martin praised as a step toward “regulatory effectiveness and efficiency.” Atkins, a deregulation advocate, has already begun reshaping the SEC’s priorities:

• Crypto’s New Rules: The SEC dismissed high-profile cases against Coinbase and Kraken, signaling a shift from broad jurisdictional claims to focusing on fraud. This aligns with Atkins’ push for clarity, which could unlock capital for blockchain innovators.
• Fraud Over Technicalities: Enforcement has pivoted to insider trading and accounting fraud, deprioritizing “creative” theories like those under former Chair Gary Gensler.
• Trade Policy’s Shadow: Atkins’ alignment with President Trump’s pro-market agenda—such as a January executive order mandating regulatory reviews—could further ease compliance burdens for companies.

However, critics warn that this shift risks investor protection. Former SEC Chief Accountant Lynn Turner has argued that the agency’s focus on “bread-and-butter” cases could leave systemic risks unchecked.

The Tariff Trap: A Persistent Cloud

Despite the rally, trade policy remains the elephant in the room. U.S.-China tariff tensions showed no signs of resolution, with China denying active negotiations. Companies like Southwest Airlines and American Airlines—both posting strong quarterly results—warned of economic uncertainty, with Southwest cutting flight schedules and American withdrawing 2025/2026 guidance.

Analysts like Mizuho Bank’s Tan Jing Yi caution that prolonged “headline turbulence” from Trump’s policies could stifle growth. The IMF has echoed this, urging swift resolution to trade disputes to avoid global economic drag.

Tech’s Double-Edged Sword

The tech sector’s performance highlights the regulatory pendulum’s impact. ServiceNow’s AI-driven gains contrast with the struggles of legacy firms like IBM, which fell 6% after maintaining conservative guidance. Meanwhile, the SEC’s new Cyber and Emerging Technologies Unit—a rebranded crypto task force—aims to tackle AI fraud, creating both risks and rewards for innovators.

Conclusion: Rally or Reset?

The market’s midday gains reflect a dual reality: optimism about regulatory clarity under Atkins and skepticism over trade policy. While the S&P 500’s 1.3% jump and ServiceNow’s 14% surge underscore investor enthusiasm for tech and AI, sectors tied to tariffs—like industrials and consumer goods—are lagging.

The critical question remains: Can the rally endure without resolution on trade?

• Bull Case: A pro-growth SEC coupled with easing trade tensions could fuel a sustained rally. The NYSE’s collaboration with Atkins on regulatory efficiency may bolster investor confidence.
• Bear Case: Persistent tariff costs (evident in PepsiCo’s 2.9% drop) and the SEC’s narrowed focus could leave companies vulnerable to fraud risks or macroeconomic slowdowns.

Investors should tread carefully. While the tech sector and AI stocks benefit from the regulatory shift, sectors exposed to tariffs—or reliant on global supply chains—face a tougher climb. The market’s next move hinges on whether Washington can deliver clarity on both policy and trade—a challenge even a new SEC chair can’t solve alone.