US stocks experienced a brief rebound on Wednesday but quickly reversed course due to concerns about the economic impact of a trade war, offsetting positive data showing US wholesale inflation remained unchanged in February.
As of 10.17 a.m. on Thursday, the S&P 500 was down 0.3 per cent, nearing correction territory for the second time this week. The Nasdaq 100 also fell by 0.6 per cent. Both indexes had seen gains on Wednesday following a report indicating a decrease in consumer inflation. The S&P 500 is approaching the 10 per cent decline mark from its record high in February, sitting at around 5,580 which would signal a correction.
Since the February peak, the S&P 500 has lost $5 trillion in market capitalisation on fears that President Donald Trump’s trade policies could hinder economic growth. The Nasdaq 100 has also dropped by over 10 per cent from its recent high, as investors raised concerns about the high valuations of major tech stocks.
Market sentiment took a hit on Thursday after Trump threatened to impose a 200 per cent tariff on wine, champagne, and other alcoholic beverages from France and the European Union, escalating trade tensions further.
“Another day of tariff uncertainty is weighing upon markets once again,” wrote Steve Sosnick, chief strategist at Interactive Brokers. Despite this, he noted that the market has found support around the level that would indicate a 10 per cent correction for the S&P 500.
The S&P 500 has been struggling to recover after breaking a two-year uptrend this week. Chart analysts suggest that it needs to surpass its 200-day moving average, currently at 5,738, to show signs of improvement. Some technical indicators also suggest that the index is already oversold, with a 14-day relative strength index at 30.
Investor sentiment has turned pessimistic, which could potentially be a positive sign for traders expecting a rebound in the S&P 500. The bull-bear ratio from the American Association of Individual Investors survey dropped to 0.3 in the week through Wednesday, the lowest level since September 2022.
Various Wall Street strategists, including those at Goldman Sachs and Citigroup, have become more cautious about US stocks this week. However, JPMorgan Chase strategists believe that equities are pricing in a greater recession risk compared to credit markets, leaving room for a positive surprise.
In terms of individual stock movements, Intel Corp. shares rose after appointing Lip-Bu Tan as its CEO. However, American Eagle Outfitters Inc. saw a decline after projecting lower-than-expected operating income. Deliveroo shares also plummeted by the most in over two years after disappointing earnings forecasts.
Overall, the uncertainty surrounding tariffs and trade tensions continue to weigh on Wall Street, with the market closely monitoring developments for potential impacts.
(Source: Bloomberg L.P.)
