The stock market is rather calm but can’t seem to relax.
In a noisy and fast-shifting news environment, stocks were quietly flattish last week from point to point, even after Friday’s almost 1% drop, which extends a sideways three-month range during which the S&P 500 has traded no more than 3% above or below its closing level from the day after the U.S. election.
The index has been sticky near the 6,000 level, caught between the opposing currents of a deeply split market, in which stocks and sectors are moving their own way rather than as a bloc. Helps explain why the CBOE S&P 500 Volatility Index (VIX) has been testing its recent floor near 15 in recent weeks.
Is this action best understood as resilience, fatigue or confusion?
A bit of each, most likely. The market action suggests investors are comforted by a sturdy economic starting point and the consensus will not easily surrender their faith in a “growth-friendly” policy mix to come.
Yet day to day, the many-forked path of policy-setting involving tariffs, immigration crackdowns, executive-branch program curbs and, eventually, a tax-and-spending package has sapped market confidence in an imminent economic acceleration.
Many of the textbook “Trump trades” pricing in a strong growth impulse driving a higher-nominal-growth economy have largely unwound. The small-cap Russell 2000 has rolled back to mid-October levels. And as shown here, the beloved industrial sector has also slid back relative to the broader market.
The selective nature of the tape is also visible in the waning proportion of large stocks that remain in a technical uptrend. This chart from Strategas Research shows the percentage of such stocks slipped just below 60%, lowest in more than a year.
It’s a testament to the market’s recent knack for clockwork rotations and the constant aggression of small retail traders (detailed here last week) that the index has stayed within a couple of percent of record highs even as broad momentum is lacking and so many individual stocks consolidate.
It’s tough to deny that the clench-and-release of tariff threats is the proximate mover of tactical trading flows and the public mood. The S&P 500 low for last week came less than an hour after Monday’s opening bell, when 25% tariffs on Canada and Mexico were freshly imposed. A 3% multi-day relief rally from there eventually took the S&P 500 to a high right at 6,100 – upside resistance unless and until proven otherwise – on Friday morning.
That was just before the University of Michigan consumer survey showed a big jump in one-year inflation expectations, almost certainly tied to tariff fears, with stocks legging lower still after President Trump vowed “reciprocal tariffs” on countries now imposing duties on U.S. goods. Stocks fell 1% from there into the weekly close.
Source: https://www.cnbc.com/2025/02/08/stuck-stock-market-is-worried-about-economic-growth-as-trumps-tariffs-dominate-headlines.html