$5.83 Trillion Lost, Then A 10% Rebound, Then Down Again — Is SPY The New Vegas?

If you blinked yesterday, you likely missed one of the craziest ETF turnarounds in recent history.

Just days since the S&P 500 plummeted below the 5,000 threshold—losing almost $5.83 trillion in value and teetering on the edge of bear market status- Wall Street saw a jaw-dropping about-face. The SPDR S&P 500 ETF Trust SPY, commonly subjected to being treated like a U.S. economy pulse check, soared an incredible 10.5% by mid-day on Thursday, the biggest gain in 16 years, dropping jaws on trading floors far and wide. As of late afternoon on Thursday, it’s down again by 4.7% as of this writing— a display of pendulum swings traders read about in their books.

Also Read: Wall Street Tumbles, Dollar Crashes, Gold Hits Record Highs As Inflation Cools More Than Predicted: What’s Driving Markets Thursday

So what’s the twist of fate? A Perfect Storm… But In Reverse

The bounce wasn’t precisely a fairy tale — rather a cocktail of short squeezes, inflation optimism, and good old-fashioned Fed speculation. Here’s what sparked it:

Bond Market: Treasury yields, which had been in chaos mode, surged Thursday, chilling the bond market. That provided some much-needed relief to equity valuations.

Fed Whispers: Traders began speculating on a potential emergency action from the Fed, courtesy of market volatility caused by tariffs. Even mere speculation was sufficient to rekindle bullish hopes.

Tech Rebound: The large-cap techs — Apple AAPL, Tesla TSLA and Nvidia NVDA— experienced extreme short covering, and prices skyrocketed as investors rushed to close out their bearish bets.

Even with SPY’s bounce, a larger narrative is unfolding in ETF land—and it’s one of investor preference changes.

Also Read: Smart Investors Are Watching These 3 ETFs After Surprise Jobs Data Beat

SPY Closes At A Rare Premium — And That Says A Lot

In yet another sign of how frenzied things got, SPY closed Thursday nearly 90 basis points above its net asset value (NAV) — an extremely rare occurrence for a fund known for tracking its index with surgical precision, according to Bloomberg. For context, SPY's average NAV dislocation over the last decade is just a fraction of a basis point. Not even the market chaos during early COVID-19 saw a gap this wide.

Why? Demand. Short-covering traders flooded in to buy and load up on index exposure, pushing closing-auction volume to 300% above average. More than 241 million shares of SPY exchanged hands as investors took advantage of the ETF’s deep liquidity to make large trades rapidly. According to Bloomberg, State Street’s Matt Bartolini described SPY as an important liquidity vehicle… and yesterday’s close surge was just one huge run of buy orders.

So, Should You Buy The Dip?

The estimated P/E Ratio of the S&P 500 Index (as computed on the SPY ETF) is 25.90, as of April 10,  according to World PE Ratio data, which also says that the P/E as of now can be denoted as “overvalued” based on calculations and comparisons.

The P/E Ratio is computed using the SPY ETF, which is based on the S&P 500 Index. This number suggests that investors may want to wait a while before things cool down.

The next few sessions, particularly after the CPI data, which shows inflation cooling for the second straight month, might decide if this is a dead cat bounce or the start of a genuine recovery.

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