S&P 500 extends losses as trade tensions escalate

The US stock market is facing one of its toughest periods since the start of the COVID-19 pandemic. On Monday, the S&P 500 opened at January 2024 levels, wiping out over six months of gains in a single weekend. The opening price settled at 4,898.8, extending a massive sell-off that dragged the market down nearly 6% last week.

The crash was primarily triggered by President Donald Trump’s announcement of new tariffs. He stated the US would impose 10% duties on all imports, with even higher tariffs targeting around 60 countries. As trading partners—including China—vowed retaliatory measures, trade tensions escalated, triggering a wave of investor panic. The Cboe Volatility Index (VIX) surged to 41, hitting its highest level in several years.

The first wave of 10% tariffs was set to take effect April 5th, with additional levies following on April 9th. The economic consequences of these measures continue to cause concern.

JPMorgan analysts are forecasting a recession, projecting a 0.3% GDP contraction. Meanwhile, US Treasury Secretary Scott Bessent views the current stock sell-off as a temporary market reaction. UBS Global Wealth Management, however, warns that stock market volatility may persist until the country's economic outlook improves.

This week also brings key releases, including the Consumer Price Index (CPI) and Producer Price Index (PPI) reports. In addition, investors' attention will be focused on the University of Michigan's data on consumer sentiment and inflation expectations.

Technical indicators point to a firm bearish trend. The MACD is in a negative zone, demonstrating the increasing downward movement. The RSI reached the level of 20, flashing oversold conditions, which may trigger a temporary correction. The Chaikin oscillator confirms heavy capital outflow, indicating the dominance of sellers in the market.

Current recommendation:

Sell at the current price. Take profit – 4600. Stop loss – 5000.