Stock traders are taking precautions as rebound get less vigorous; to protect themselves in the middle of signs of a deepening standoff on trade.
Equity strategist Matt Maley said, “When the trade negotiations broke down, that was a big change.” He added, “You have to adjust. When the market goes down in reaction to new news — like we just got in the breakdown of the trade negotiations — when the initial bounce fails, that’s when people stop buying the dips.”
With Nasdaq bearing the brunt of the selling and marking many May afternoons with technology, US equities have failed to muster one of the rousing recoveries. With short interest on the most popular S&P 500 exchange-traded fund surging toward the highest levels of the year, hedges are being deployed in case shares fall further.
“In this case, caution is called for,” Keon said. “Managing other peoples’ money is not just about maximizing expected return; it’s also about managing risks. And right now there’s more downside risk than there is upside potential.”