(Bloomberg) — Wall Street’s attempt to rebound after one of the sharpest-ever stock corrections left the market’s most-influential group behind on Monday.
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More than 90% of the companies in the S&P 500 rose, but the cohort of megacaps like Tesla Inc. and Nvidia Corp. came under renewed pressure. While there’s a near universal belief that tech giants are still the highest quality companies in the world, the question is whether these advantages are already baked into the share prices, and may now be under threat — if big bets on artificial intelligence don’t pay off as expected and the economy slows down.
Just a few days ahead of the Federal Reserve decision, economic data did little to alter bets on the path of monetary policy. Money markets don’t see rate cuts before June or July. A sense of wait-and-see may emerge from policymakers this week, in their first assessment of how President Donald Trump’s trade policies are impacting the economy.
“While financial markets appear to be stabilizing, investors are wrestling with the decision of whether to buy the dips or sell the rallies in an environment of exceptionally high policy uncertainty,” said Jason Draho at UBS Global Wealth Management.
Treasury Secretary Scott Bessent, a former hedge fund manager, said he’s not worried about the recent downturn in equities as the US seeks to reshape its economic policies.
“I’ve been in the investment business for 35 years, and I can tell you that corrections are healthy, they are normal,” Bessent said Sunday on NBC’s Meet The Press. “I‘m not worried about the markets. Over the long term, if we put good tax policy in place, deregulation and energy security, the markets will do great.”
To Bret Kenwell at eToro, despite the mixed update on retail sales, the data could give investors some cautious optimism that perhaps we might see a more resilient consumer in the coming months.
“If the consumer can hold up, there’s a good chance the economy can too,” he said.
A sign of stability is emerging after the S&P 500 plunged into a correction last week: Traders are ditching bets that another deep slide is ahead.
Even before the benchmark for US equities rebounded strongly on Friday, the group was largely offloading its S&P 500 hedges. The cost of options protecting against a 10% decline in the SPDR S&P 500 ETF Trust in the next three months plunged to near the lowest level since 2023 relative to contracts that profit from a 10% rally, data compiled by Bloomberg show.
