The US stock indices closed higher, recording the strongest gains of 2024. The Dow industrial average increased by 619.05 points, or 1.56%, reaching 40,212.71 points.
The S&P index rose by 95.31 points, or 1.81%, to stand at 5,363.36. NASDAQ saw a rise of 337.14 points, or 2.06%, reaching 16,724.45, while the Russell 2000 gained 28.80 points, or 1.57%, at 1,860.2047.
Strongest Weekly Performance
For the trading week, the Dow industrial average advanced by 4.95%. This marked its best week since a 5.07% increase on October 30, 2023.
The S&P index rose by 5.7%, also indicating its best week since a gain of 5.85% on October 30, 2023. NASDAQ climbed by 7.29%, the highest since an 8.10% rise on November 7, 2022.
The Russell 2000 increased by 1.815%, its best week since a 3.95% gain on January 13, 2025.
These latest market moves underline a powerful resurgence in sentiment. After weeks marked by uncertainty and hesitant trading, this strong rally signals a swift return to risk appetite. The broad-based increases across the Dow, NASDAQ, S&P, and Russell imply that buying pressure wasn’t confined to a handful of sectors—it was widespread. The speed and size of the gains draw comparisons with late 2023, when similarly sharp rebounds inflicted short squeezes and forced reassessments of downside protection.
The timing of this week’s gains, coming after a prolonged phase of muted upward momentum in equities, is noteworthy. Prior sessions had shown more patience on the part of both discretionary and systematic participants, so this sharp rise suggests positioning may have been caught off guard. That’s particularly obvious in the way the NASDAQ surged past levels that had previously proved sticky—suggesting that some hedging strategies tied to tech exposure were swiftly unwound.
Influences on Market Sentiment
Powell’s remarks earlier this week contributed to a substantial shift in rate expectations, which in turn alleviated recent pressure on long-dated yields. With real rates falling back and the front end of the curve softening slightly, TINA (there is no alternative) reasoning re-emerged amongst institutional flows, encouraging equities. This is no longer just an adjustment to economic data—it reflects a repricing of how long policy will remain tight.
Options markets mirrored this enthusiasm. The VIX dropped, risk reversals changed shape, and open interest in short-dated call spreads rose notably. When we see such a combination—index levels moving higher in step with dealer flows—it has to be read as traders reopening exposure that had been either trimmed or inverse to direction. Curiously, volume in downside puts didn’t disappear, but it did rotate longer in maturity—a tell-tale signal that participants may not be fully convinced this rally is durable.
For our positioning, that change in behaviour from monetising gamma trades to chasing delta upside should not be ignored. A sharp move higher off subdued implied volatility levels often brings in follow-through, especially if realised volatility continues to lag. Tactically, it means focusing on where skew is flattening and whether bids in further out-of-the-money calls are genuine or just arbitrage against short volatility structures.
Of note, small-cap outperformance in the Russell 2000 suggests a rebalancing in expectations around domestic economic strength. That should prompt a reassessment of the current bias in equity volatility pricing. When breadth increases, especially after a stretch where only a handful of mega-cap stocks carried the weight of index performance, historical volatility can catch up quicker than options premiums anticipate. That has implications for those deploying straddles or short-iron structures.
We should also not ignore where positioning data is pointing. Flows into leveraged equity ETFs picked up from mid-week, and margin balances remain elevated but stable—indicating there’s still room for forced buying if this trend extension continues. Meanwhile, CFTC data reveals modest but steady increases in net long exposure in S&P and NASDAQ futures by asset managers, while non-commercial accounts appear less aggressive. This divergence enhances the importance of price levels that coincide with CTA re-risking thresholds.
For the tactical weeks ahead, scan where June expiry open interest clusters sit; many popular strikes have now moved into the money. That opens the door for large-scale dealer adjustments, especially if we move another standard deviation higher in the early part of next week. Such positioning imbalances tend to amplify short-term swings and can lead to multi-day continuation, particularly into the last week of the quarter.
Monitor gamma exposures around 5,400 in the S&P and 17,000 in NASDAQ. Those levels now look like pivot points. If spot settles above, it may lead to dealer hedging activity that further pushes spot upward. If we drift back below those strikes near expiry, it could expose the indices to sharper reversals driven more by mechanics than by a change in sentiment.
There’s a case, too, for looking further out on the term structure. With the recent repricing easing stress on front-end yields, forward guidance implied in bond futures deserves attention. It has the potential to become a driver of duration-linked equities and feed into sector rotation strategies. All of this reinforces the need to actively hedge option book deltas—particularly where strikes cluster near newly created local highs.
In short, price action tells us this isn’t just relief—it’s structured re-entry. As liquidity normalises post-quarter-end and economic prints trickle in, it’s worth maintaining both upside convexity and tactical downside protection. The data tells a clearer story now than in prior weeks, and we must respond before the tape moves again.
