The selloff yesterday put US equities on the backfoot again this week, with the threat of five consecutive weekly declines on the cards. The overall risk sentiment remains fragile at best, with tech shares staying under pressure. The chart is also not looking too bright, as seen with the Nasdaq below:
Nasdaq Composite index weekly chart
The same run of the mill factors are still playing since last month. Trump tariffs, political uncertainty, economic softness, the AI bubble running into trouble, and valuations staying overstretched. Adding to that is arguably investor rotation to Europe as well after the German spending news in the past few weeks.
The final point is rather evident with the S&P 500 down 5.7% this month but the DAX is seen up 3.7% instead.
At some point, US equities will be due a breather from the selling. But unless dip buyers really pull their weight, it’ll be just that i.e. just a mere breather.
As Wall Street continues to come under pressure, investors are looking to the Fed later today for some help.
But all else being equal, I’m not sure what can the Fed really do given the current situation. They have to walk a fine line and not sound hawkish but at the same time, they have no conviction to deliver certainty on the timing of the next rate cut either.
If investors are hoping for Powell & co. to offer some comfort, I’m afraid they might end up disappointed later today.
The beacons are lit. But unlike in the story, Rohan might not come for Gondor’s aid – at least not this time.
