The announcement of new tariffs set to begin on February 1 has cast a shadow over the US equity markets, leading to increased uncertainty and a risk-off sentiment among investors. This development has resulted in a higher correlation among S&P 500 stocks, indicating a market moving in unison due to broader economic concerns. The energy sector has been particularly hard-hit, reflecting potential impacts on international trade and commodity prices. Additionally, value stocks are underperforming growth stocks, and small caps are lagging behind large caps, as investors gravitate towards more stable, established companies amid heightened market uncertainty.
Market volatility indices, including the VIX, have shown a rise, signaling a greater fear premium being priced in. This has led to an uptick in put option selling as traders seek downside protection, reflecting a more bearish market outlook. The fear of retaliatory actions related to the tariffs further dampens market confidence, contributing to a souring sentiment as the weekend approaches.
The S&P 500 Index is currently at 6,040.32 as of 16:02 on January 31, down from its last close of 6,071.17. The index experienced an intraday high of 6,120.91, but the negative sentiment surrounding the tariff announcement has weighed heavily on the market, leading to a decline as investors brace for potential further negative developments.