US stock index futures were lower across the board in early trade on Monday. This saw the majors give back some of Friday’s gains. But they subsequently reversed direction and flew into positive territory, ironically on the back of poor Retail Sales and a dire Empire State Manufacturing Index.
Back in February, US equities seemed overdue a correction. But the sell-off since then has been severe, taking both the S&P 500 and NASDAQ into correction territory, that is, a decline of 10% or more from recent highs. The situation across smaller, more domestically-focused US equities has been even worse.
The Russell 2000 has dropped close to 20% from its high in November, meaning that it is almost in ‘bear market’ territory. This represents a stunning reversal of fortunes given the 12% rally in the index in the week following Donald Trump’s election victory.
Sentiment has certainly soured since President Trump’s inauguration in January. His haphazard imposition of tariffs on close trading partners and his dismissal of longstanding US allies in the geopolitical arena have thrilled and stunned onlookers in equal measure.
The financial fallout has been severe. And while all the major US stock indices now look oversold, there are no clear indications that the market has definitely bottomed and is ready to recover to fresh highs.
Source: TN Trader
Friday saw the release of disappointing Consumer Sentiment and Inflation Expectations surveys, with the former dropping close to a thirty month low. But last week’s CPI and PPI inflation data both registered welcome dips. This helped to raise the probabilities of additional rate cuts from the US Federal Reserve the year.
The central bank holds a two-day meeting this week which ends on Wednesday. There is little chance of a rate cut in March, but Fed Chair Jerome Powell’s subsequent press conference will be important.
Mr Powell has said recently that the Fed is in ‘no hurry’ to cut rates further. But the FOMC will produce its quarterly Summary of Economic Projections. It could signal its intentions for further monetary loosening through its forecast for the Fed Funds rate this year, and also its outlooks for inflation and economic growth.
Investors will also be hoping for some calming words over the likelihood of a recession in the US this year. This was something that US Treasury Secretary Scott Bessent failed to rule out during a television interview yesterday.
Tomorrow, there’s a keynote speech from NVIDIA’s CEO, Jensen Huang. The stock has dropped 20% from January’s high, having rallied off its lows. But this is considerably better than Tesla which has halved from its own record high from mid-December.
