The stock market’s action on Wednesday was a bit like trying to pick a dinner spot with friends—lots of back and forth, but no real direction.
The market started out higher and went up and down without much of a directional bias until the Fed made its expected interest rate decision and Fed Chairman Jerome Powell’s press conference. Stock prices dipped lower, but right before the close, another headline moving event surfaced: President Trump announced the rollback of some chip-related restrictions. This news gave the market a boost into the close.
Here’s how the broader indexes closed:
- The Dow Industrials ($INDU) finished up 0.70%.
- The S&P 500 ($SPX) rose 0.43%.
- The Nasdaq Composite ($COMPQ) added 0.27%.
Tech Leads, but Alphabet Takes a Hit
In terms of sector performance, Technology came out on top, followed by Consumer Discretionary and Health Care. On the flip side, Real Estate, Communication Services, and Materials were the laggards.
The main reason behind the stumble in Communication Services was Alphabet, Inc. (GOOGL), which dropped by a whopping 7.26%. Why the selloff? An Alphabet exec testified that Google was losing search traffic to AI tools.
The StockCharts’ S&P 500 MarketCarpet (below) reflects Wednesday’s price action.
FIGURE 1. STOCKCHARTS MARKETCARPETS FOR MAY 7, 2025. It was mostly green with some pockets of red.Image source: StockCharts.com. For educational purposes.
Overall, Wednesday’s performance is leaning more positive than negative, but is it enough to break through critical resistance levels?
Resistance Levels in the S&P 500
To get a clearer picture, we need to check out the daily chart of the S&P 500 ($SPX).
FIGURE 2. S&P 500 FACING A LOT OF HEADWINDS. THE 61.8% Fibonacci retracement level is a resistance level the index is struggling to break above.Chart source: StockCharts.com. For educational purposes.
The S&P 500 is sandwiched between its 50- and 200-day simple moving averages (SMAs). The Fibonacci retracement levels drawn from the February high to April low show that the 61.8% retracement level is proving to be a stubborn ceiling. Add to that the downward-sloping 50-day SMA, and the market may have a tough time moving higher. To leave the downtrend in the rearview mirror, the S&P 500 would have to break above its 200-day SMA with the necessary follow-through to keep it above that level. So far, the price action suggests that the S&P 500 will face headwinds to get to that stage.
News Moves Markets, Like the Chip Surprise Today
Remember, the market’s price action is like riding a rollercoaster powered by headlines. This can sometimes send technical analysis into a disarray.
Take, for example, today’s news about lifting the chip restrictions, which sent semiconductor stocks higher. The VanEck Vectors Semiconductor ETF (SMH) jumped 2.05% (see chart below).
FIGURE 3. DAILY CHART OF SMH. Will the semiconductor ETF be able to break out above its May 2 high?Chart source: StockCharts.com. For educational purposes.
Like the chart of the S&P 500, SMH needs to work harder at breaking its downtrend. The one ray of hope is that Wednesday’s move reached the May 2 high. The downside: it wasn’t able to break above it. This shows investors are cautious about semiconductors and the overall equity market.
Volatility Says It All
The caution among investors can be seen clearly in the chart of the S&P 500 vs the Cboe Volatility Index ($VIX).
FIGURE 4. VIX VS. S&P 500. Even though the VIX pulled back from its April peak, it’s still above average.Chart source: StockCharts.com. For educational purposes.
What’s interesting is that while the VIX fell when the S&P 500 rose from mid-April, the VIX hasn’t dropped to its average level of 19. It’s still trading above it, which is another point that increases the probability of further downside in equities.
The Bottom Line
There is a lot going on: geopolitical tensions, trade deal updates, policy shifts. Any of these can jolt the market in either direction.
It was encouraging to see tech stocks and semiconductors bounce on Wednesday, but that doesn’t mean we’re headed back to the days of growth stock leadership. If you’re an investor, especially one managing retirement money or nearing retirement, the best approach is to be patient. We’re not out of the woods yet.
As always, stay alert and stick with your investment plan.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
