S&P 500 and Nasdaq 100: Stock Market Rebounds, But More Selling May Be Ahead

By:

James Hyerczyk

Published: Mar 5, 2025, 10:25 GMT+00:00

Key Points:

Stock futures rebound after sharp losses, but analysts warn of more downside as recession fears and trade risks grow.
S&P 500 nears correction territory, with investors eyeing key technical levels for potential support or further declines.
Tariff concerns drive volatility as the U.S. imposes new duties on China and Mexico, triggering retaliatory measures.
Financial conditions weaken, signaling that the recent stock market downturn may not be fully priced in yet.
Market sentiment remains bearish but not extreme enough to signal a major buying opportunity, analysts caution.

In this article:

US Wall St 30

+0.50%

S&P 500

+1.12%

Stock Market Rebounds in Pre-Market, but Economic Uncertainty Looms

Daily E-mini S&P 500 Index

The stock market faced heavy losses on Tuesday, with the S&P 500 wiping out gains since Trump’s election victory as tariff concerns rattled investors. However, futures pointed to a rebound early Wednesday after Commerce Secretary Howard Lutnick suggested that President Trump could soften his stance on tariffs. While this has provided a temporary lift, broader economic uncertainty suggests any rally could face renewed selling pressure.

Tariffs Spark Market Jitters

Daily E-mini Nasdaq 100 Index Futures

The S&P 500 closed down 1.2% on Tuesday at 5,778.15, its lowest since November 4, while the Dow Jones Industrial Average fell 670 points, shedding 1.6%. The Nasdaq Composite briefly touched correction territory before ending 0.4% lower at 18,285.16. Market fears were fueled by the U.S. imposing 25% tariffs on imports from China and Mexico, with China, Canada, and Mexico preparing retaliatory measures.

Josh Jamner of ClearBridge Investments noted that tariffs would drive inflation higher while acting as a drag on economic growth—an unfavorable mix for risk assets. Investors have responded by pulling capital from equities, leading to two straight sessions of heavy selling. The S&P 500 is now hovering near its 200-day moving average, a key technical level that could offer temporary support.

Investors Await Further Signals Amid Recession Fears

Despite the pre-market bounce, Michael Brush from MarketWatch warns that more selling could follow, citing several key risks. First, further economic data, such as Friday’s employment report, could reinforce recession fears. Second, investor sentiment, while bearish, has not reached extreme levels typically associated with market bottoms.

Additionally, financial conditions continue to deteriorate, signaling that the market downturn may not be fully priced in. Bloomberg’s Financial Conditions Index has been weakening all year, a trend that previously led to a 10% S&P 500 correction in 2023. The decline in discretionary stocks relative to staples also suggests weakening consumer confidence, a historical precursor to further market losses.

Temporary Bounce or Selling Opportunity?

Daily E-mini Dow Jones Industrial Average

Futures rebounded early Wednesday, with the Dow up 255 points and Nasdaq futures gaining nearly 1%. This optimism followed Lutnick’s comments that Trump may compromise on Canada and Mexico tariffs. However, analysts remain skeptical about whether this will translate into a sustained rally.

Jonathan Krinsky of BTIG notes that a short-term bounce off the 200-day moving average is likely, but warns that the market may see a “W-shaped” bottom rather than the rapid recoveries traders have become accustomed to. If economic data weakens further, selling pressure could return, pushing the S&P 500 into correction territory.

Market Outlook: Caution Prevails

While Wednesday’s pre-market gains offer temporary relief, traders should remain cautious. The overhang of trade uncertainty, weakening financial conditions, and slowing growth suggests any rally could be short-lived. Investors looking to buy on weakness may find better entry points ahead, while those attempting to time the market should be wary of false breakouts.

More Information in our Economic Calendar.

About the Author

James HyerczykProfits & Punchlines

Mr.Hyerczyk is a technical analyst, market researcher, educator and trader. Jim is an expert in the area of patterns, price and time analysis, Forex and stocks.