Turbulence was again on display in the US stock market on Wednesday, with the S&P 500 Index swinging wildly between gains and losses as investors assessed a deepening trade war and a cooler-than-expected inflation report.
The S&P 500 Index rose 0.7% as of 12:27 p.m. in New York after briefly erasing an earlier gain of as much as 1.3%, posted after the latest report on consumer prices. The intraday swing of more than 1% was the 14th straight session the equity benchmark has swung at least that much – the longest streak since 2022. The Nasdaq 100 Index rose 1.5% and the Dow Jones Industrial Average was flat. The Cboe Volatility Index fell to about 24.5.
Stocks have struggled to stabilize after a three-week selloff that has wiped out almost 10% from the S&P 500 as President Donald Trump presses his trade dispute with America’s largest commerce partners.
Equities looked set for a reprieve from the selling after Trump and Canada de-escalated their spat late Tuesday and on progress in securing a potential truce between Russia and Ukraine. Futures contracts spiked to session highs after the inflation data early Wednesday, but the rebound faded as Trump’s 25% tariffs on metals imports triggered immediate reprisals from the European Union and Canada.
“Investors are more concerned with the uncertain forward outlook for inflation and growth as tariffs take effect,” wrote Kevin Brocks, director of 22V Research.
Sell-side strategists are growing gloomier about US stocks. Goldman Sachs Group Inc. strategists lowered their year-end target for the S&P 500 Index to 6,200 from 6,500. The reduction was also in view of declines in the “Magnificent 7” stocks.
The move comes after Citigroup and HSBC downgraded their views on US equities this week, citing similar worries around the economy and noted better opportunities elsewhere.
“There is simply a lack of confidence,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “Given the correction was sharp and caught many investors off guard, investors are quickly using the bounce to reduce risks.
Hedge funds positioning has also shown signs of de-risking. Combined de-grossing activity by hedge funds on Friday and Monday was the largest in four years and ranks among the top events over the past 15 years, according to Goldman Sachs prime desk.
Technical indicators suggest that while stocks may rise in the next days and weeks, there are still thresholds to hit before a rally starts, including the S&P 500 recapturing its 200-day moving average.
