Stock markets faced renewed instability as worries over the impact of a potential trade war overshadowed positive economic reports. Despite data showing the U.S. economy remains resilient, concerns about trade tensions have weighed heavily on investor sentiment.
Equities reversed earlier gains, and market sentiment remains fragile, especially after the S&P 500 entered correction territory just a week ago. The market is gearing up for a major event on Friday, as $4.5 trillion in options contracts are set to expire. This phenomenon, known as triple witching, is often associated with increased market volatility.
FedEx, Micron, and Nike Earnings
In late trading, FedEx Corp., a key economic indicator, saw its stock drop after it reduced its profit forecast. On the other hand, Micron Technology Inc. issued a positive sales forecast, and Nike Inc. reported earnings that surpassed analysts’ expectations.
Market Volatility Likely to Persist
Daniel Skelly, head of Morgan Stanley’s Wealth Management Market Research & Strategy Team, believes the recent correction may be nearing its bottom, but warns that volatility is likely to continue. He emphasized that uncertainty around policy remains, and markets remain highly sensitive to changes in sentiment.
Federal Reserve Chair Jerome Powell, after the Fed’s decision to keep interest rates steady this week, minimized concerns about growth and the potential negative effects of a trade war. President Trump’s administration is expected to announce new tariffs on April 2, although the specifics remain unclear.
Ongoing Trade Concerns Impacting Sentiment
Michael Rosen, chief investment officer at Angeles Investments, stated that market volatility will persist as long as policy uncertainty continues. He noted that investor sentiment will remain unpredictable, which will be reflected in market fluctuations.
Major Index Performance
On Thursday, the S&P 500 declined by 0.2%, and the Nasdaq 100 fell by 0.3%. The Dow Jones Industrial Average showed mixed performance. Tech giants like Apple Inc. saw declines, while Nvidia Corp. ended higher. A gauge of homebuilders rose following stronger-than-expected existing home sales data.
Treasury Yields and Currency Movements
The yield on 10-year U.S. Treasuries remained steady at 4.24%. The U.S. dollar strengthened by 0.3%, while the British pound continued to lose value after the Bank of England decided to keep interest rates unchanged amid global economic uncertainty.
The Need for Clearer Tariff Messaging
Jamie Cox of Harris Financial Group believes the market would benefit from clearer communication on tariffs. “With any luck, the administration will repackage its messaging on tariffs, which could help reduce the uncertainty currently plaguing markets,” Cox said.
S&P 500 Faces Stabilization Efforts
Bespoke Investment Group strategists note that the S&P 500 is attempting to stabilize after a sharp decline. They pointed out that stabilization doesn’t necessarily mean an immediate rally. “Usually, it takes a period of back-and-forth movement before the market gains enough strength to rebound,” they said.
Investor Sentiment and Market Recovery
Bespoke also referenced a survey from the American Association of Individual Investors showing bearish sentiment at 58.1%. This marks the fourth consecutive week of readings above 55%, an unprecedented occurrence in the survey’s history. Despite these concerns, stocks have made a significant recovery since mid-March, and some experts argue that the market’s current behavior reflects a typical correction rather than a bear market.
Investment Strategies in Uncertain Times
Clark Bellin of Bellwether Wealth believes that the market’s recent actions are consistent with a correction and not the start of a prolonged bear market. “We remain invested and are using the pullback in valuations across sectors to our advantage,” he said.
Solita Marcelli of UBS Global Wealth Management emphasized the importance of cash optimization and durable income in uncertain times. She pointed out that U.S. stocks have historically outperformed cash by over 200 times since 1945, underscoring the long-term value of staying invested.
Marcelli recommended a diversified approach, including stocks with hedges and quality fixed income, as well as strategies such as senior loans, private credit, and equity income, to build a resilient portfolio in challenging market conditions.
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