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The US stock market remained timid on Wednesday for the third consecutive way. Wall Street investors are bracing for volatility ahead.
On Wednesday, September 8, US stock indices Dow Jones (INDEXDJX: .DJI) and S&P 500 (INDEXSP: .INX) ended in the red for the third consecutive day. The Dow Jones was down by 69 points or 0.2% and the S&P 500 was down by just 0.1%.
It means the fall was less intensified than Tuesday’s market correction when Dow Jones lost 260 points. The index managed to hold above 35,000 levels on Wednesday’s closing basis. Similarly, the S&P 500 ended above the 4,500 level yesterday.
The rising number of Delta variant cases in the US has cautioned Wall Street investors. Besides, analysts are predicting a slowdown in the economic recovery due to this. Many market analysts have already cut down targets for 2021 annual growth.
Shares of crypto exchange Coinbase Global Inc (NASDAQ: COIN) tanked more than 3% on Wednesday. This happened as the exchange cited a legal threat coming from the SEC. Coinbase noted that the US SEC can sue the exchange for entering the lending business involving the USDC stablecoin.
COIN Shares ended Wednesday’s trading session at $258.20. Since its public listing in April 2021, it is already down by more than 21%.
Dow Jones and S&P 500: Bracing for September Volatility
Historically, the month of September has been the month of corrections in the market. Thus, we can expect some strong volatility going ahead this month. Already, the indexes have rallied strongly so far in 2021.
Dow Jones is up by 15% whereas S&P 500 and the Nasdaq Composite are up by 20% each. But so far in the month of September, each of these indices is in the negative zone. In a note to investors, Morgan Stanley chief cross-asset strategist Andrew Sheets said:
“We see a bumpy September-October as the final stages of a mid-cycle transition play out. The next two months carry an outsized risk to growth, policy and the legislative agenda.”
Furthermore, that have been fears that the Federal Reserve will start rolling back its stimulus plans going ahead this year. Last month, Fed Chairman Jerome Powell already indicated the same and withdrawing its easy-money policies before the year-end. however, he has added that there’s enough time for any interest rate hikes.
However, wealth manager UBS has raised the S&P 500 price target to 4,650 for the year and 4,850 by the end of 2022. In a note to clients, UBS wrote:
“The summer rally to a new S&P high, with potential headwinds like rising rates on the horizon, has left investors debating whether US equities can make meaningful new gains the rest of this year and into next year. Equities are likely to have a pullback at some point, likely driven by another reset in real yields higher, but other tailwinds should drive the S&P 500 to a new high by year end”.
The recent “Beige Book” report from the Federal Reserve notes that growth had “downshifted slightly to a moderate pace”. This is due to the rising public health concerns over the last two months.