Worries about waning Russo–Ukraine optimism and robust US data which solidified Fed tightening forecasts and yield curve inversions were all mentioned.
The S&P 500 trades at just over 4600, and is on track to close the month 5.3% higher.
US equity prices are slightly lower across the board Wednesday as investors profit from the recent strong run higher. Investors also keep an eye on geopolitical developments, the outlook on Fed policy, and the US economy. After rallying to 4640 on Tuesday, the S&P 500 is now trading at 4600. It has dropped 0.5% due to a decrease in optimism regarding RussoUkraine peace negotiations after ongoing Russian aggressions across Ukraine.
Investors deemed the robust US data (March ADP job and Q4 GDP Core PCE inflation) to be supportive of 50 bps Fed rate hikes in May. Investors should be concerned that expectations for Fed tightening faster have pushed some key components of the US yield curve toward inversion. Inversions have been able to accurately predict recessions in the past. Investors also cited these as reasons to profit-taking and Wednesday's modest downturn.
This means that the index is set for its first negative session since March 15th, and its third since then. The index has risen by a remarkable 9.5% since then and is expected to see a monthly gain around 5.3% as the month ends. Accordingly, the S&P 500 will suffer a loss of 3.3% in its quarterly report. This is the worst quarterly performance since H12020. However, this masks the fact the index was able recover more than 11.5% from the earlier quarter lows printed in February in the 4120 region.
The other major US indices are also down. However, the tech-heavy Nasdaq100 index fell 0.7% last week. It was supported north of the 15,100 mark by the strong support. Tuesday's 15,200s high marked the index's highest point since mid-January. The index trades at 2.5% higher on the week. However, gains since February's end are about 6.3%. This strong monthly gain means that the Nasdaq 100 will end the quarter with losses around 7.0%. That's not bad considering that the index was down more than 20% at one time.
The Dow fell 0.2% at the end of January, but remains supported above 35,000. It is on track to finish the month with gains in the region of 3.9% and losses in the quarter of 5.0%. CBOE S&P 500 volatility Index (or VIX), was last seen consolidating in the 19.00 zone. It is now near its lowest level since mid January, after falling precipitously from its 37.50ish highs earlier in the month. Analysts are questioning the resilience of the stock markets and the apparent complacency in VIX (which has fallen to 20 from its long-run average value of 20), given the elevated risks of geopolitics and Fed (and central banks) policy, and inflation.
