Analysis-Ominous market signals show more trouble could await US stocks

By Lewis Krauskopf and Suzanne McGee

NEW YORK (Reuters) - Investors are wary astir worrisome marketplace signs, aft a steep U.S. stocks selloff that has wiped retired much than $4 trillion successful worth and each of the gains notched pursuing President Donald Trump's election.

Among the signs are method signals specified arsenic the S&P 500 connected Monday closing beneath a important inclination line, a cardinal measurement of the market's internals weakening, a concerning signifier successful volatility futures contracts, rising currency levels among investors and de-leveraging by hedge funds distant from equities.

U.S. equities experienced a punishing driblet this week, with the S&P 500 concisely falling into correction territory connected Tuesday arsenic uncertainty implicit Trump's tariffs exacerbated worries astir economical growth.

“This is simply a classical S&P 500 selloff, with maturation stocks taking it successful the teeth," said Patrick Fruzzetti, managing manager of Rose Advisors, portion of wealthiness absorption steadfast Hightower Advisors. "With much bearish signals appearing, this could beryllium ongoing for rather a while."

After registering its biggest driblet of the twelvemonth connected Monday, the benchmark S&P 500 scale endured different volatile time connected Tuesday, ending down 0.8%. The scale has dropped 9.3% from its February 19 grounds high, with immoderate of the market's highest fliers including Nvidia and Tesla deed peculiarly hard. It is present down 3.6% since Trump's November election.

TARIFF, RECESSION UNCERTAINTY

The ominous marketplace signals adhd to increasing anxiousness astir the economical outlook. A Reuters canvass past week recovered 95% of economists crossed Canada, the U.S. and Mexico said the hazard of a recession successful their respective countries had accrued pursuing Trump's chaotic tariff implementation.

Trump has offered conflicting views connected whether the U.S. could look a recession amid tariff concerns. Over the play helium declined to foretell if determination could beryllium a recession. On Tuesday Trump's instrumentality connected a imaginable recession was: "I don't spot it astatine all."

"The backmost and distant connected tariff announcements is playing havoc with user and concern confidence," equity strategists astatine HSBC said successful a note.

Shares of large U.S. airlines sank connected Tuesday aft Delta Air Lines slashed its first-quarter nett estimates by half. Delta's CEO said the situation had weakened owed to U.S. economical uncertainty.

WORRYING TECHNICAL SIGNALS

On Monday, the S&P 500 closed beneath its 200-day moving mean -- a intimately watched semipermanent trendline -- for the archetypal clip since precocious 2023.

Bespoke Investment Group recovered that successful 15 different instances erstwhile the S&P 500 stayed supra its 200-day moving mean for astatine slightest a year, erstwhile the scale yet fell beneath the trendline, returns implicit the adjacent twelvemonth were mostly weaker than normal. The S&P 500 roseate 6.9% connected a median ground successful those cases compared with a 10.3% one-year median summation historically.