Written by Linh Tran, Market Analyst at XS.com
The S&P 500 ended yesterday’s trading session down 1.07%, breaking a two-day winning streak. Despite a slight recovery from its recent lows, market sentiment remains fragile due to concerns over U.S. economic policies. Notably, President Donald Trump’s indication that a potential economic recession could be an inevitable consequence of restructuring trade relations has significantly impacted investor confidence.
The VIX index has remained above 20 for 11 consecutive sessions, reflecting heightened investor concerns about market volatility. The increase in this index suggests a growing risk-averse sentiment as uncertainty over U.S. economic and trade policies intensifies. If the VIX continues to stay at elevated levels, selling pressure could persist in the coming sessions.
Recent economic data continues to indicate weakness in the U.S. economy. February retail sales rose only 0.2% from the previous month, falling well short of the 0.6% forecast, signaling a decline in domestic consumption. The Empire Manufacturing Index also dropped to its lowest level in over a year, highlighting a slowdown in the manufacturing sector. These figures have raised concerns that the U.S. economy is under significant pressure from the Trump administration’s tariff policies, reducing expectations for growth in the next quarter and exerting downward pressure on both the stock market and the S&P 500.
The imposition of new import tariffs, combined with ambiguous signals from trade negotiations, is increasing market uncertainty. Investors are becoming more cautious due to the lack of clarity regarding future economic policies, especially as the U.S. may continue expanding tariffs on various strategic goods.
In yesterday’s session, strong selling pressure in the technology sector dragged the S&P 500 lower. Major tech stocks, including Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA), faced selling pressure as investors worried about growth prospects amid a weakening economy. Conversely, defensive sectors such as healthcare and utilities recorded smaller declines, indicating a shift of capital into lower-risk assets.
Today, investors are awaiting the U.S. Federal Reserve’s two-day policy meeting. While the Fed is expected to keep interest rates unchanged, the market is closely watching for its outlook on future monetary policy. Whether the Fed adjusts its economic forecasts will directly influence market direction. If the Fed signals concerns about economic growth, it could add further pressure to the market in the short term.