JPMorgan on the overnight surge in U.S. stocks: This is just a tactical rebound after overselling.

Ask AI · Oil prices remain unchanged—does this indicate that market optimism may be unsustainable?

U.S. stocks rebounded strongly overnight, but one of Wall Street’s biggest banks poured cold water on the rally.

The S&P 500 index surged 2.8% in a single day Tuesday, marking the largest single-day gain since May 2025, and also the strongest quarter-end close since September 2008.

However, JPMorgan’s trading desk bluntly stated in a review: the core driver of this rebound was not fundamental improvement, but a technical correction triggered by extremely oversold positions combined with quarter-end rebalancing needs.

TMT trader Brian Heavey wrote after the close: “From our flow data, there are no signs this is anything more than a tactical bounce after an oversell.” Meanwhile, oil prices remained virtually unchanged—this detail is viewed by multiple analysts as a key signal that market optimism may be hard to sustain.

Trigger factors: Old news ignites new market moves

The immediate catalyst for the rebound was two headlines related to de-escalation in the Middle East situation. One reported that media suggested Trump might be willing to end military operations without fully opening the Strait of Hormuz; the other quoted Iranian President Pezeshkian saying Iran would be willing to end the war if security guarantees are provided.

According to CCTV News, Iranian President Pezeshkian stated that Iran is willing to end the war, but only if its demands are met, especially guarantees against further invasion. Additionally, Xinhua reported that U.S. President Trump said on the evening of March 31 at the White House that the U.S. would end its conflict with Iran within “two to three weeks,” possibly reaching an agreement before then.

But these do not constitute substantive new information. Analyst Andrew Tyler wrote: “This may not be new news. It’s the initial demands Iran made two to two and a half weeks ago—seeking security guarantees from the U.S. and Israel that not only stop attacks but never resume—because Iran fears becoming a target again after the U.S. midterm elections. This is very similar to Ukraine’s demands on Russia.”

Tyler further pointed out that after these demands went unanswered, Iran escalated its conditions to demand U.S. military withdrawal from the Middle East and added war reparations. These details are reflected in Iran’s response document to Trump’s 15-point proposal.

Positioning is the main factor: oversold conditions plus quarter-end rebalancing

The main credit for the rally goes to positioning factors, not the geopolitical news itself.

According to positioning data, as of last Friday, the overall market positioning was at the 18th percentile, comparable to mid-March 2025, rebounding from April lows but still in a historically low range—over the past four weeks, positions have declined by 2.5 standard deviations.

Meanwhile, quarter-end pension rebalancing brought about approximately $34 billion in buying demand, marking the eighth-largest single-day pension inflow of this century. Trend-following system investors (CTAs), based on previous data, have sold a net $184 billion in global equities over the past month and hold about $47 billion in net short positions—an extremely bearish structure that could trigger short covering on any positive news.

Goldman Sachs’s trading desk also confirmed this view in its close report, noting that if the S&P 500 rises another 3.5% from current levels, CTA buying demand would accelerate significantly, with key thresholds at 6,735 and 6,738 points.

Oil prices steady, market optimism may be hard to sustain

Oil price movements are viewed as a key indicator of the credibility of this rebound.

JPMorgan industrial sector expert Paige Henson said that if investors truly believe that a military withdrawal can bring substantial risk reduction, oil prices should respond accordingly. However, pre-market and intraday oil prices hardly moved, leading her to remain cautious about whether market optimism can continue. “I think the real risk reduction event is closely tied to the reopening of the Strait of Hormuz; we need sufficient visibility and confidence that Iran will fully or largely reopen the strait after U.S. military withdrawal.”

Commodity strategist Natasha Kaneva also reiterated that damage has already been done, and oil prices are likely to continue rising in the short to medium term. Brian Heavey directly cited this judgment in his report, using it as one of the reasons why this stock market rebound lacks substantial support.

Technology sector remains fragile

At the sector level, tech stocks experienced intense two-day volatility.

JPMorgan TMT trader Joshua Myers pointed out that Monday was one of the worst days recently for U.S. TMT momentum stocks, with the core AI infrastructure sector falling 5.6% in a single day, led by optical and storage fields, with IGV outperforming SOX by over 5 percentage points. MU dropped 9.9% in one day, SNDK fell 7%, HDD makers STX down 4.6%, WDC down 8.6%, optical component COHR down 9.8%, LITE down 6.8%, FN down 10.9%.

On Tuesday, NVIDIA announced a strategic partnership with Marvell (MRVL) and invested $2 billion, with MRVL soaring 8.8% in a single day. The collaboration includes MRVL providing customized XPU and compatible NVLink Fusion extended networks, while NVIDIA supplies Vera CPUs, ConnectX network cards, Bluefield DPU, NVLink interconnects, and Spectrum-X switches. Myers believes this deal reflects the accelerating penetration of custom ASIC chips and is a formal recognition of ASIC importance.

Nevertheless, Heavey remains cautious about the storage sector’s rebound, noting that although Micron shows signs of buying on dips, “the overall feeling remains very fragile,” and hardware stocks are beginning to see short sellers re-enter.

Investors remain cautious; ETF short positions remain high

Despite the rebound, overall market activity remains limited.

According to a Goldman Sachs report, the activity score in their trading room was 4 out of 10 that day, slightly better than the 2-3 range maintained over most of the past two weeks, but still well below normal levels. The day’s theme was clearly focused on the “losers’ rebound” since the start of the year—quantum computing, meme stocks, software, and the “Mag 7” sectors led the gains, with a combined market cap increase of about $751 billion since last Friday’s close.

Meanwhile, ETF short positions remain high. ETF short exposure stays at around 40%, and the previous day, the overall U.S. stock market was net sold, with long sellers outnumbering short sellers by 4.3 to 1.

All these data points lead to one conclusion: market sentiment has not truly shifted, and this rebound is more about technical pressure release than the start of a trend reversal.