US stocks experienced a dramatic late-session rebound on Friday, driven by gains in major tech companies, reversing an earlier selloff triggered by disappointing corporate outlooks. This volatile session was further amplified by a massive options expiration, resulting in the highest trading volume of 2025.
Despite the recovery, investor sentiment remains cautious due to ongoing concerns around economic slowdown, trade tensions, and stretched tech valuations.
Tech Stocks Power the Reversal
A strong rally in companies like Tesla pushed the S&P 500 back into the green, with Tesla gaining momentum into the close. However, Nvidia bucked the trend, ending lower on the day.
The broader recovery masked initial losses caused by weak guidance from FedEx, Nike, and Lennar, which had fueled recession fears.
Options Expiry Fuels Record Volume
The triple witching event—where stock index futures, stock options, index options, and single-stock futures all expired—drove volumes above 21 billion shares, marking the busiest trading day of 2025 so far and amplifying market swings.
Investor Sentiment Remains Mixed
Morgan Stanley warned that market volatility is likely to persist through the first half of the year, with new highs unlikely in the near term. Additionally, trend-following funds have turned net short on US equities for the first time in over a year, reflecting a shift in sentiment.
Interestingly, retail investors have continued to pour money into US equities, a trend some analysts interpret as a sign that the market may not have bottomed yet.
Global Capital Flows Defy Recession Fears
Despite persistent trade tensions, global equity markets—particularly in export-heavy economies like Germany and China—have seen strong capital inflows, suggesting some skepticism around the risk of a US-led recession.
Meanwhile, the 10-year Treasury yield edged up to 4.25%, and the dollar posted modest gains.
Weekly Market Recap
For the week, the S&P advanced +0.5%, while the tech-heavy Nasdaq Composite added +0.2%. The blue-chip Dow climbed +1.2%.
Friday’s Closing Levels:
| Index | Close | Change | % Change |
|---|---|---|---|
| Dow Jones | 41,985.35 | +32.03 | +0.08% |
| S&P 500 | 5,667.56 | +4.67 | +0.08% |
| Nasdaq | 17,784.05 | +92.42 | +0.52% |
| US 10Y | 4.246% | — | — |
| VIX | 19.28 | -0.52 | -2.63% |
What Friday’s Rally Really Means
The most important takeaway? After a four-week losing streak, markets finally closed higher this week.
But how much weight can we give this rebound?
As noted in previous commentaries, triple witching often distorts price action. Market makers aim to neutralize options exposure, frequently driving prices away from heavy open interest levels. On Friday, there were a significant number of put options just below market prices—potentially contributing to the late-session surge.
So, does that mean we are going higher from here? Maybe. Historically, markets that rally on high volume tend to sustain momentum. However, if that volume was mostly tied to expiring options, it may not indicate genuine buying pressure.
From a technical standpoint, the market has more work to do. The S&P 500 remains below its 200-day moving average, a key resistance level. Until we reclaim that, traders should be cautious.
Expect potential selling into rallies as uncertainty persists.
Source: CBOE, Bloomberg
This commentary was written by James Gomes, a seasoned finance professional with over 30 years of industry experience, including a tenure exceeding 20 years at a prominent US bank.
Risk Disclosure
Securities, Futures, CFDs and other financial products involve high risks due to the fluctuation in the value and prices of the underlying financial instruments. Due to the adverse and unpredictable market movements, large losses exceeding your initial investment could incur within a short period of time.
Please make sure you fully understand the risks of trading with the respective financial instrument before engaging in any transactions with us. You should seek independent professional advice if you do not understand the risks explained herein.
Disclaimer
This information contained in this blog is for general reference only and is not intended as investment advice, a recommendation, an offer, or an invitation to buy or sell any financial instruments. It does not consider any specific recipient’s investment objectives or financial situation. Past performance references are not reliable indicators of future performance. Doo Prime and its affiliates make no representations or warranties about the accuracy or completeness of this information and accept no liability for any losses or damages resulting from its use or from any investments made based on it.
The above information should not be used or considered as the basis for any trading decisions or as an invitation to engage in any transaction. Doo Prime does not guarantee the accuracy or completeness of this report and assumes no responsibility for any losses resulting from the use of this report. Do not rely on this report to replace your independent judgment. The market is risky, and investments should be made with caution.
