Stock market may end winning streak of six days due to concerns about economic growth
Wall Street made a solid comeback on Wednesday, gradually clawing back losses from the morning's plunge, even though the S&P 500 was on the brink of halting a six-day winning streak.
Investors faced a barrage of lackluster economic data, causing a flinch in market sentiment. For instance, Q1 GDP unexpectedly took a nosedive by 0.3%, marking the first decline since Q1 of 2022. This contraction points to sluggish consumer spending and broader economic activity, troubling investors who were hoping to build upon recent gains.
Furthermore, mixed corporate earnings added a layer of uncertainty to the mix. Some companies like Booking Holdings managed to outperform expectations, but heavyweights such as Caterpillar fell short. Despite the partial recovery, the index stands 10% below its February 2025 peak. Island-hopping rallies, like the 10.8% rebound from April’s depths, are often met with consolidation periods, creating an air of downward pressure.
Key factors contributing to this roadblock include the GDP contraction, pre-market apprehension, and the technical context. The alarming 0.3% decline in GDP contradicted initial forecasts of a 0.4% growth spurt. The Vanguard S&P 500 ETF (VOO) slid by 0.9% before the market opened, indicative of the caution prevalent among investors. Lastly, the extended correction (down approximately 10% from its peak) exposed the index to renewed selling.
One piece of positive news came in the form of a noticeable rebound in pending home sales for the month of March. However, this upswing couldn't fully counterbalance the broader macroeconomic worries permeating the market.
The S&P 500's recovery on Wednesday was influenced by the financial market's resilience, yet it failed to halt a six-day losing streak due to the benchmark's vulnerability to losses. The economy's lackluster Q1 GDP data, causing a flinch in market sentiment, significantly contributed to this trend. Moreover, the index stands 10% below its February 2025 peak, indicating that the finance industry's investing decisions are still heavily influenced by the sluggish economic activity. The contraction in GDP, pre-market apprehension, and the extended correction are key factors that influenced the business environment on Wednesday.
