Stocks recover from sell-off, but even bulls warn of more volatility
A statue of a bull and a statue of a bear stand in front of the Frankfurt Stock Exchange on April 7, 2025 in Frankfurt, Germany.
Florian Wiegand | Getty Images News | Getty Images
Global stock markets rose on Tuesday, marking a temporary recovery from volatility sparked by aggressive selling in global tech names.
US stocks came under pressure on Friday due to a sharp decline in chip stocks. As the negative momentum spilled over into Asian trading, European tech stocks were also hit. This comes after a negative earnings report from Broadcom sparked a rotation in AI-related stocks.
As of Tuesday, global stocks appeared to be recovering from the sell-off. U.S. stock futures were last trading significantly higher, along with futures tied to technology-dominated markets. Nasdaq 100 added 0.7%.
European technology stocks rose for the second day in a row, driven by regional markets Stoxx 600 While the technology index regained some of the losses experienced on Friday, South Korea’s technology-heavy index kospi The index rose more than 8% on Tuesday after two days of losses.
‘Variability is the price of acceptance’
Although many investors remain bullish on stocks, more turbulence is expected on the path to higher returns.
Robert Edwards, chief investment officer at Florida-based Edwards Asset Management, said in a note that the pullback in tech stocks is “a gift to investors.”
Describing the market movements as a “sawtooth pattern”, he said, “We continue to be buyers on declines.”
“Sharp pullbacks have been met with aggressive buying because investors know that strong fundamentals, including strong revenue and earnings growth, remain in place despite the noise,” he said. “This is what bull markets look like in their infancy, with violent movements up and down, which can be disturbing, but the general trend is upward.”
Edwards Asset Management manages assets worth $3 billion. S&P 500 will reach 7,700 points by the end of the year; This represents an increase of approximately 4% from Monday’s closing price. Edwards said he expects further volatility to create “plenty of buying opportunities,” although his forecast suggests most of the market’s gains this year have already been priced in.
“These buying opportunities could come from a 7% to 12% correction due to uncertainty over new Fed Chairman Kevin Warsh and additional delays in opening the Strait of Hormuz, where oil remains high long enough to reignite inflation concerns,” he said.
Edwards also noted that while upcoming mega-cap IPOs are “the adrenaline rush for a bull market hitting its tipping point,” the “enthusiasm” signals that typically signify a market cap are not yet present.
“We are at the beginning of a crazy buying spree that is worth continuing,” he said. “Our message to investors is to stay invested, stay disciplined, and not shy away from pullbacks. Earnings are real, cash set aside is huge, exciting IPOs are just getting started, and macro headwinds are more likely ahead – the reopening of Hormuz, oil crashes, and a Fed cut. This is where big runs are born. Volatility is the price of acceptance.”
Recent market weakness “looks more like a repricing than a fundamental break in the growth story,” Anthony Willis, senior economist at Columbia Threadneedle Investments, said in a note Tuesday. But he noted that the selling pressure was a reminder that “strong fundamentals do not eliminate volatility.”
“The weakness seen in parts of Asia following Friday’s tech sell-off suggests markets are reassessing what appears to be an increasingly relaxed environment,” he said. “The question is not whether growth will deteriorate, but whether markets will adapt to a more challenging mix of more durable data, higher interest rate expectations and persistent geopolitical risks.”
Before the sell-off, Willis noted that AI optimism had triggered a rally that saw U.S. stocks rise for nine consecutive weeks. But stronger-than-expected U.S. employment data on Friday led markets to point to the Federal Reserve reconsidering its policy path, as well as tense positioning and questions about funding demands for the next phase of the AI cycle as drivers of last week’s shift in sentiment.
“When markets rebound sharply, rising expectations and concentrated positioning can make them more vulnerable to disappointment. This does not indicate a turnaround in the overall cycle. This may only indicate a repricing starting at very optimistic levels,” said Willis.
“Our broad view remains constructive. The message is discipline, not austerity,” he added. “The case for risk assets still rests on resilient growth and earnings, but selectivity becomes more important when valuations rise and the macro backdrop becomes less straightforward.”
In a note sent to clients Monday evening, analysts at Citi said positioning in U.S. equity markets is “increasingly healthier” and more balanced following the recent decline.
Noting that Friday marked the Nasdaq Composite’s steepest single-day decline since April 2025, Citi analysts pointed out that warmer-than-expected labor market figures strengthened expectations for possible increases by the Fed towards the end of this year.
Citigroup separately raised The year-end forecast for the S&P 500 to rise from 7,700 to 8,100 on Monday points to an almost 10% rise for the index, which is already up more than 8% since the beginning of 2026.
But Citi analysts warned on Monday evening that last week’s trades had created a “bifurcated market” that could be vulnerable to disappointing headlines.
“The $14.7 billion in new short positions marked the largest weekly short squeeze seen all year, while the simultaneous addition of $4.78 billion in new long positions (with no evidence of long liquidation) highlights two distinct camps: macro-driven bears and investors who remain strong believers in buying AI-driven pullbacks.”
“With 72 percent Nasdaq With long positions still in the money and positioning size at extreme levels, the market remains vulnerable to downside convexity, where negative catalysts could trigger accelerated long liquidity. “That could trigger more long-term liquidations in the near term, especially if this week’s tech earnings announcements disappoint.”
