(Bloomberg) — US equity rebounded from a three-day selloff as dip buyers emerged after fears of a trade-war induced recession wiped out more than $5 trillion of stock-market value.
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The S&P 500 gained 3.3% as of 9:30 a.m. in New York, the Nasdaq 100 advanced 3.5%. Nvidia Corp. was up 6.31%, leading the Magnificent Seven stocks higher.
A rebound comes as traders welcomed some signs that US President Donald Trump’s administration is willing to negotiate his punitive tariffs downward even as a cycle of tit-for-tat retaliation is threatening to emerge with China.
Japan is expected to get priority in US tariff talks ahead of other countries seeking to roll back Trump’s duties, and Treasury Secretary Scott Bessent said up to 70 counties asked to negotiate tariffs and solid proposals may lead to good deals.
“The initial shock phase following President Trump’s tariff announcement appears to have run its course,” said Colin Cieszynski, chief market strategist and portfolio manager at SIA Wealth Management. “First reaction on Thursday, panic on Friday, stabilization yesterday and today the bargain hunters appear to be stepping in and short sellers covering. This is a relatively common pattern following external shocks to the system.”
But SpotGamma’s founder Brent Kochuba said it may reflect the still low liquidity in the stock market, which can amplifies market moves. “Liquidity is terrible so anyone with just a decent-sized order is going to move the market,” he said.
S&P Emini’s top of book depth — or the number of futures available on the bid or offer — dropped to at $2.1 million, according to The Goldman Sachs Group, Inc.’s trading desk. That has became the widest gap between volume and liquidity in the bank’s data set.
A model from UBS Group AG’s trading desk shows that Monday morning had a high chance to be the bottom of the selloff.
“Since 1990, after a weekly selloff of over 10% that ended on Friday, S&P 500 rose 80% of time in 1 day and 1 week +5.8% and +4.7% on average,” Rebecca Cheong, UBS Securities’ head of Americas equity derivatives wrote in a note to clients.
Another test for stocks starts this Friday as earnings season kicks off, starting with results from big US banks including JPMorgan and Wells Fargo & Co.
