It is unusual that major U.S. equity indexes finish a calendar year in the green after seeing a steep drop.

Much to the surprise of many on Wall Street, the S&P 500 has managed to erase all of its losses from earlier in the year, and the Dow Jones Industrial Average is not far behind.

If stocks keep on rising from here, it could result in an extremely rare accomplishment. Out of fifteen total instances that the S&P 500 SPX has seen such a steep intra year drop since 1950, it has only managed to recover and finish in the green three times.

As of recent trading the S&P 500 had managed to close the gap, although these gains must last through the closing bell to make them official.

Meanwhile, the Dow Jones Industrial Average (DJIA) was still about half a percentage point shy of the milestone.

The Nasdaq 100 NDX has also erased its losses from earlier in the year, largely driven by a comeback in shares of semiconductor stocks and Big Tech names. However, its sibling, the Nasdaq Composite COMP, remained in the red, albeit within two percentage points of its early 2025 levels.

The years when the S&P 500 managed similar comebacks were 1982, 2009 and 2020, according to an analysis by Dow Jones Market Data.

A similar pattern holds for the Dow. At its closing low on April 8, the blue-chip gauge was down 11.5% for the year. An analysis of how it performed afterward found the 30-stock average only managed to finish the year higher five times out of twenty-six total instances.

Right now, the momentum certainly seems to favour the bulls. Since the S&P 500 fell to the cusp of bear-market territory on April 8, stocks have staged an impressive comeback, with the index rising 17.5% off its lows.

Most valuation metrics show that large-cap U.S. stocks are overvalued relative to history, and some momentum gauges, like the relative-strength index, have been flirting with a move into overbought territory.  There are some bullish signs too – The number of S&P 500 stocks trading above their medium-term averages recently climbed back above 50%.

But some still see reason to be concerned. Sentiment gauges, including the American Association of Individual Investors’ weekly survey, show many investors remain downbeat about where stocks might be headed over the next six months.

While the aggressive “retaliatory” tariffs unveiled by President Donald Trump on April 2 were largely to blame for the rapid selloff in stocks, the administration’s decision to walk them back – at least temporarily – has helped power the turnaround.

A deal with China announcing a 90-day reduction in tariffs by both sides served as another bullish catalyst for stocks on Monday. U.S. stocks saw their best performance since April 9, Dow Jones Market Data showed.

Both the S&P 500 and the Nasdaq Composite COMP looked to add to those gains on Tuesday, while the Dow remained stuck in the red, largely due to a selloff in shares of UnitedHealth Group Inc. (UNH).  Investors will likely remain squarely focused on Trump’s trade policy for the rest of the year.

“There’s a bull case and a bear case: The bull case is we’ve got time; we’ve backed off away from the edge and we’ve removed the worst-case scenarios for the possible outcomes,”

“The bear case is it takes a long time to negotiate deals.”

By Joseph Adinolfi, Marketwatch 14 May 2025