By Teresa Rivas

The S&P 500 started Monday above the key 5,500 mark. By midday, it had inched down to 5,475 or so. Just a smidgen of a drop but enough to beg a couple of questions: Can it pull itself back up to 5,500? And if it can, can it stay there and go higher?

Last week was a good one for markets. The S&P 500 ended up 4.6% higher. The Dow Jones Industrial Average and the Nasdaq Composite notched sizable gains, too.

Yet, even with those big moves, stocks are still at levels that would have been disappointing at the start of the month -- and even laughable at the start of the year, before tariff chaos engulfed Wall Street.

And like the tariffs, the moves were dished up by President Donald Trump -- mostly, at least.

One minute the commander in chief was boasting about U.S.-China talks -- negotiations starting, at last -- and getting close to deals with other countries. And the next he was stepping back from his on-again, off-again threats to fire Fed Chair Powell.

Sprinkle in decent earnings reports from Big Tech stocks and -- viola -- a recipe for much hoped-for rally of sorts.

The S&P 500's 5,500 level is important from a technical perspective, and meaningful -- if it holds.

"A three-day rally is constructive, but the S&P 500's March lows around 5,500 [are] the key resistance level to watch," wrote Piper Sandler Chief Market Technician Craig Johnson on Friday. "Until that level is achieved, ideally with increased volume, more backing and filling is likely. Successfully clearing that level will likely lead to another leg up toward 5,800."

Renaissance Macro's Jeff deGraaf -- he serves as both chairman and technical research head -- zeroed in on technicals as well.

Last week's moves were accompanied by "sentiment which in many instances was more bearish than when the market was near the lows at the beginning of April, deGraaf writes.

"Nothing drives sentiment like returns, so investors increasing skepticisms on strength and continued improvements in credit suggest the first glimpses of overbought readings."

Yet more fundamentally: What Trump gives, Trump can take away, with little more than a social media post or flippant remark.

The longstanding feud with Powell is far from over, and could erupt again when the Fed meets on May 7, given that it probably won't cut interest rates like the president wants -- really demands.

And though most legal scholars think it would be tricky for Trump to remove Powell, it just adds one more layer of uncertainty.

"In our deep dive that examined the ability of a President to remove the Chair, we described the research literature and legal precedent as leaving the issue somewhat unsettled," writes UBS Economist Jonathan Pingle. "'Unsettled law' was the phrase we used."

Then, back to tariffs. Any deal with any country that gets hammered out will be worse than the trade picture at the start of the year, when there were almost no tariffs on U.S. imports.

"Regardless of what level of tariff reduction we see, the baseline level of tariffs will be much higher than it was in January and that will be a headwind on growth and a tailwind on inflation," writes Tom Essaye, president of Sevens Report. "Regardless of whether tariffs cause a recession, they are negative for growth, the only question is by how much."

To that point, Essaye notes that last week's earnings reports are less of a salve since they reflected the first quarter -- not the new reality of tariffs or reduced demand for U.S. goods that will probably cause more analysts to lower estimates of full-year S&P 500 earnings per share.

"Last week was positive, but it wasn't positive enough to alter my outlook that this market is still mostly rangebound between 5,100 and 5,500 in the S&P 500," Essaye concludes.

Now, consider something else entirely. Even if tariff deals come, even if Trump holds his tongue about Powell, and even if the republicans turn to market-boosting tasks like tax cuts, his policy whims undermined faith in America, what the world once held as the unshakable base to the global financial system.

Trump's modus operandi, after all, is brash, extreme moves. During his campaign, he promised to shake U.S. institutions to their core -- and he is.

Just few months into Trump 2.0, Arbroath Group's Christopher Smart points out that just a it's important not to jump to conclusions.

Yet, at the same time, an "America with legal institutions under siege, research programs unraveling and stagnant population growth is a very different investment proposition from what investors have counted on for decades...faith in institutions and trust from allies are difficult to repair once the first fissures appear, the managing partner writes.

"Cracks spread the longer they go unattended, and many go undetected until it's too late."

Smart likens the current upheaval to the 2011 earthquake that rattled Washington, D.C.

"The Treasury building survived that earthquake intact and we were all back in our offices soon enough. Even after extensive restoration work, however, the Washington Monument and the National Cathedral were never quite the same."

Institutions of great strength -- great position, forever changed. That's a sobering fact...and something to think about.

Write to Teresa Rivas at teresa.rivas@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 28, 2025 14:26 ET (18:26 GMT)

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