The S&P 500 traded lower than 7,000 (at 6,939.03) as of writing, extending losses after touching an all-time high above 7,000 for the first time in history late January. US equity futures weakened on Monday, with S&P 500 futures down 1.1% and Dow Jones futures sliding 0.9%, signaling a cautious start to the week.
The pullback followed Friday’s decline, when the S&P 500 and Dow Jones both lost 0.4%, while the Nasdaq Composite dropped 0.9%. After weeks of relentless upside momentum, risk appetite cooled sharply.
Was this overdue consolidation or the start of something deeper?
Fed Leadership Uncertainty Pressures Equities
Investor sentiment shifted after President Donald Trump nominated Kevin Warsh as the next Federal Reserve chair. Markets reassessed the outlook for monetary policy, balance sheet reduction, and Fed independence. Warsh, viewed as less tolerant of prolonged monetary accommodation, revived concerns that interest rates may remain restrictive for longer.
A hotter-than-expected US wholesale inflation report reinforced that view, reducing expectations for near-term rate cuts. The Federal Reserve’s role in balancing inflation control and economic growth remains central, and leadership uncertainty added another layer of volatility to already stretched equity valuations.
Source: X
Risk aversion intensified as gold and silver collapsed in a violent reversal. Gold traded near $4,773 per ounce as of writing, down sharply from its late-January peak near $5,600. Silver fell below $80 per ounce after reaching an all-time high of $121.64 just days earlier. The combined market value of gold and silver dropped by roughly $4.02 trillion in a single day on Monday, with losses exceeding $10 trillion over three sessions.
Gold erased over $7.4 trillion in market value, while silver shed nearly $2.7 trillion. These moves reflected forced liquidations rather than shifts in long-term fundamentals, yet the shockwaves rippled across global markets.
Margin Hikes and Leverage Drive Liquidations
The sell-off accelerated after the CME Group raised margin requirements for gold and silver futures on February 2. Higher capital demands forced leveraged traders to unwind positions rapidly, triggering cascading sell orders. Both metals entered February in extremely overbought territory, with relative strength index readings above 90.
Source: X
Once momentum reversed, liquidity dried up quickly. The disorderly liquidation highlighted how leverage across futures markets can transmit stress into equities, currencies, and broader risk assets.
Currencies and Cross-Asset Signals
Currency markets reflected the same unease. A firmer US dollar emerged as investors reassessed Fed policy expectations, while safe-haven flows failed to stabilize precious metals. Equity investors watched these cross-asset moves closely.
When traditional hedges like gold and silver fall sharply, it often signals a scramble for liquidity rather than confidence. That dynamic raised concerns about short-term equity downside, even as longer-term trends remain intact.
Technical Levels and the Data Ahead
Technically, the S&P 500 appeared on track for four consecutive down sessions, a pattern not seen since August. Analysts noted that holding above the 6,800 level remains critical for maintaining upside momentum toward longer-term targets.
However, the near-term path depends heavily on incoming US data. This week’s calendar includes ISM Manufacturing and Services PMIs, JOLTS job openings, ADP payrolls, weekly jobless claims, nonfarm payrolls, wage growth, and consumer sentiment.
Source: ForexFactory
Each release may reshape expectations for Federal Reserve policy and market direction. Will the data calm markets, or fuel another leg lower?
Source: https://coinpaper.com/14223/s-and-p-500-price-prediction-crashes-under-7-k-as-gold-wipes-4-t
