What Just Happened?
Markets took a beating on Friday, with the Dow dropping 1.7%, S&P 500 falling 1.97%, and the Nasdaq tumbling 2.7%—one of the worst sessions this quarter. The selloff was sparked by a hotter-than-expected Core PCE report, the Fed’s preferred inflation gauge, which showed a 0.4% monthly rise and 2.8% year-over-year gain.
Simultaneously, renewed tariff concerns out of Washington sent fresh shockwaves through global markets. President Trump reaffirmed his administration’s intent to implement a 25% auto import tariff, starting next week—fueling fears of a global trade escalation just as inflation reaccelerates.
Traders' Immediate Reaction
The reaction was swift and brutal. Tech led the retreat, with names like NVIDIA (-1.5%), Tesla (-4.3%), and Amazon (-4.3%) dragging the Nasdaq lower. Meanwhile, the VIX spiked above 19, indicating a rush for downside protection and hedging.
Options flow pointed to increased put buying on SPY, QQQ, and individual mega-cap tech names, especially for next-week expirations—a classic signal of near-term fear. Institutional desks reportedly lightened risk, while retail traders appeared to chase volatility plays into the close.
Where’s the Opportunity?
Despite the carnage, there may be opportunities emerging. Utility stocks held up relatively well—likely benefiting from both rising oil prices and the sector’s historic inflation hedge status.
Gold (GLD) and Treasury ETFs (TLT) saw heavy inflows, suggesting a macro rotation is underway. For contrarians, oversold signals are already flashing in names like AAPL, which bounced intraday after testing its 200-day moving average.
Tactical Moves: How to Trade This Setup
For short-term traders, watch for a potential relief bounce early next week, especially if bond yields stabilize or Fed speakers walk back hawkish expectations. The SPX 5500 level is the first key support zone; a decisive break there could open the door to deeper downside toward 5400.
For macro traders, this is a moment to tighten risk, increase cash positions, and consider defensive rotations. Hedged trades like bear call spreads on overheated tech or long volatility positions still offer asymmetric payoffs.
If the tariff threat escalates, watch industrials and auto suppliers—they could be the next to roll over.
The Trader’s Take (by Isabella)
This wasn’t just a bad day—it was a macro wake-up call. Inflation isn’t going quietly, and now we’re layering geopolitical trade risks on top of an already fragile disinflation narrative. For long-term investors, it’s a reminder that policy risk and supply-side shocks are back in play.
I wouldn’t be diving in aggressively just yet—but I am watching how the market responds to upcoming Fed commentary. If Powell shifts dovish, the bulls could reclaim control. If not, the March lows might not hold.
Stay defensive, stay informed—and remember: the market’s mood can shift faster than the data.
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