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Unraveling the Causes Behind Recent US Stock Declines

By Samir Al Khoury,

The major US stock indices, the Standard & Poor’s 500, the Dow Jones, the Nasdaq 100, and the Russell 2000, closed with losses yesterday. On the other hand, the VIX Fear and Volatility Index, which expresses investors’ expectations regarding price movement in the stock market, rose to 16.92 points yesterday, which is its highest level since February 13, 2024, which indicates investors’ turmoil and discomfort in the American stock markets.

This decline in US stocks, specifically the Standard & Poor’s 500 index, is due to several factors, the most prominent of which are:

  • Cautious statements by some Fed members, specifically Fed Chairman Jerome Powell, who said that there is no need to rush to lower interest rates.

  • The strength and resilience of US economic data, such as the Manufacturing Purchasing Managers’ Index issued by the Institute for Supply Management (ISM), which recorded a growth of 50.3 points, its highest level since September 2022.

  • Selling power on the SPDR ETF, which tracks the performance of the Standard & Poor’s 500 Index.

  • The operations of put options contracts significantly exceeded the operations of call options contracts on US stocks.

  • Standard & Poor’s 500 index valuations are considered very high, about 25 times compared to the rest of the global stocks.

It is worth noting that the markets have reduced their bets on interest rate cuts in the United States of America, as they are currently pricing in the possibility of a rate cut of less than three times, contrasting with the expectations of Federal Reserve members or the dot plot, which indicated a three-time rate cut.

Finally, the markets are eagerly awaiting today’s release of crucial indicators in the United States, including the non-farm jobs report, unemployment rate figures, and average hourly wages. These data points will have a direct impact on the movement of US stocks. Any weaknesses in these indicators may provide upward momentum to US stocks.

On the technical front, according to Fibonacci analysis, the VIX index is expected to rise to levels of 17.75 points (50.00%), 19.01 (61.80%), and 20.08 (78.60%).

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

Taurex is the trading name of Zenfinex Global Limited, Stochastic Africa SL Ltd, Zenfinex Global LLC, and Zenfinex Limited.

Zenfinex Global Limited is registered in the Republic of Seychelles with registration number: 8428731-1 and is regulated by the Financial Services Authority of Seychelles (license number SD092). Its registered office address is F20, 1st Floor, Eden Plaza, Eden Island, Seychelles.

Stochastic Africa (SL) Limited is a company registered in Sierra Leone with Company Number: SL270319STOCH05271 and is licensed by the Bank of Sierra Leone under license number BSL/SAL/2023 and with the registered office at 148D Wilkinson Road, Freetown, Sierra Leone.

Zenfinex Global LLC is a company registered with the Financial Services Authority in Saint Vincent and the Grenadines under registered number 138 LLC 2019. Its registered office is Hinds Building, Kingstown, Saint Vincent, and the Grenadines.

Zenfinex Limited is a company registered in England and Wales under registered number: 11077380. Authorised and regulated by the Financial Conduct Authority under firm reference number 816055. Its registered office is 4th Floor, 4 Eastcheap, London, EC3M 1AE, United Kingdom.

*All trading involves risk.

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