S&P 500 dips again after failing to reclaim 4600 level, now down more than 4.0% on the year

• US equities dipped again on Wednesday, with the S&P 500 failing to reclaim 4600 and down over 4.0% in 2022.
• The Nasdaq 100 dipped 0.2% and the Dow fell 0.3%.

US equity markets have been under modest selling pressure on Wednesday, with market commentators citing continued fears about Fed tightening and higher interest rates, but also describing the day as one of consolidation. The S&P 500 dropped about 0.1% to trade close to 4570, after hitting fresh weekly and annual lows in the 4560s, with traders eyeing a test of the 4530ish lows printed back on December 20. The index attempted but failed to recover back above 4600. On the week, the index is now down about 2.0%, taking on the year losses to about 4.3%. The sectoral performance was mixed but indicative of a defensive bias, given outperformance in the S&P 500 GICS Consumer Staples (+1.2%) and Utilities (+0.9%) sectors.

The S&P 500 GICS Financials sector was the underperformer, shedding about 1.1% as US yields pull back from recent highs (the 10-year was down about 4bps to 1.83%) and following recent downbeat earnings. In fairness, Q4 results from Morgan Stanley (+2.2%) and Bank of America (+0.8%) were better received, but not enough to turn the tide for the sector. Meanwhile, the easing in yields gave the recently battered tech sector some respite. Despite the recent upside in crude oil prices, the energy sector was broadly flat.

Looking at the other major US indices, the Dow was down just over 0.3% while the Nasdaq 100 was flat, with the latter recovering back to 15.2K after printing fresh 2022 lows under 15.15K. The indices are down just under 3.0% and nearly 7.0% respectively on the year. In a sign of further choppiness ahead, the S&P 500 CBOE volatility index or VIX hit fresh highs for the year just under 24.0, substantially up from this year’s starting levels in the 16.0s. The VIX remains well below its post-Omicron peaks near 36.0.