Join Kathleen Brooks, NOW as she discusses what's moving financial markets, why volatility is rising sharply and what could happen next.
After the big sell off, comes a modest recovery. Monday’s price action was brutal. The sell off pushed the Nasdaq close to correction territory, and the index is down nearly 10% YTD. The Trump trade unwind has been brutal for stock markets, especially in the US, but the impact has not been even. For example, on the S&P 500, Tesla has fallen nearly 45% YTD and is the weakest performer on the index. In contrast, CVS Health Corp is higher by 45%. There is a clear preference for defensive sectors like healthcare in the US right now.
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The tech sector led the sell off on Monday, and it was down by more than 4%. Tech’s biggest hitters including Nvidia, Microsoft and Amazon are all below their 200-day smas. Apple is testing its 200-day sma, the S&P 500 and the Nasdaq 100 are both below their 200-day smas. This is problematic. There is a saying in financial markets that nothing good happens below the 200-day sma. Thus, it can be a self-reinforcing cycle: stocks fall below a certain level, this causes more people to sell, and the stock continues to fall. The US tech titans won’t fall indefinitely, it could take an external driver, like a pause in President Trump’s unorthodox economic policy, to see US stock markets get out of their current rut.
The S&P 500 is expected to recover at the open, and Nasdaq futures are also higher. European stocks are staging a tentative recovery early on Tuesday, although the recovery in Asian stocks was short lived. The market is awaiting direction from the US later today, and we may need to wait for Wednesday’s US CPI report before the market makes its next directional move.
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