UK Stocks Close Slightly Lower

By Joseph Adinolfi

Watch the 'VIX, the Cboe put-call ratio and stock-market breadth for clues about when the bottom might arrive

After a turbulent month for U.S. stocks, many investors are wondering: What's happening with the market, and where is it heading next?

On Thursday, the S&P 500 SPX was once again flirting with a 10% drop from its February record high, commonly known on Wall Street as a correction. The Nasdaq Composite COMP, which has fallen 13.8% from its record in December, is already there.

Nobody can say for sure when the selloff will end. The big concern right now is that losses will snowball into a bear market if the U.S. economy tumbles into recession.

But, over the years, professional market watchers have happened upon a few "tells" that can offer clues about what might be coming down the pike. Many have one thing in common: that they are counterindicators.

When sentiment grows too bearish, or demand for downside protection surges, it can suggest that a bottom has been reached.

After speaking with a handful of stock-market experts, MarketWatch has compiled a lineup of six charts that investors should keep an eye on.

Lower lows and lower highs - that's bearish

When the stock market is doing well, investors typically jump in to buy on every hint of weakness.

But when this pattern gets turned on its head, and every measure of strength is greeted with a wave of selling - that's when investors need to be careful. It could signal more pain ahead.

When investors sell stock-market "rips" during a downdraft, it signals that they're not confident that any short-term gains will hold. That's why the pattern of lower daily lows, and lower daily highs, that investors have seen since the S&P 500 peaked on Feb. 19 is so concerning, said Scott Bauer, the founder of Prosper Trading Academy and a former market maker on the Cboe, formerly known as the Chicago Board Options Exchange.

"This is a sell-the-rip market, not a buy-the-dip market," Bauer told MarketWatch. "It shows that investors are definitely not confident right now."

That said, Bauer believes the market is likely near a bottom, and he doesn't expect the market's losses to snowball into a full-blown bear market. But, given all the uncertainty, and investors' apparent nervousness, it's still worth watching the charts.

Put-call ratio isn't signaling much fear

When stocks are selling off, market technicians look for signs of what they call "capitulation." To them, it suggests that the market has gotten so washed out that there is essentially nowhere to go but up.

The Cboe total put-call ratio tracks trading activity in bearish put options compared with bullish calls. It's a popular gauge of market sentiment. Recently, the lack of a pickup in demand for puts relative to calls has caught the attention of some on Wall Street. It stood at 0.91 on Tuesday, not even the highest level of 2025.

"We really haven't seen defensive buying happening in options, we really haven't seen a huge move for put buying, and the put-call ratio hasn't really budged," said Craig Johnson, chief market technician at Piper Sandler.

Corporate credit spreads are still pretty tight. Widening could be a bad sign.

The bond market has been sending mixed messages lately.

While Treasury yields have fallen dramatically over the past month, reflecting growing concerns about whether the U.S. economy can weather President Donald Trump's tariffs, corporate credit spreads have remained mostly unperturbed.

One popular gauge of high-yield credit spreads has risen over the past month, but other recent growth scares - like the yen carry trade unwind that rattled global markets on Aug. 5 - saw an even bigger jump in a shorter period of time.

See: Trump's tariff fight may be making this early recession signal go haywire

According to data from the St. Louis Federal Reserve, one popular index of high-yield credit spreads stood at 3.22% as of Tuesday's close.

"What you're really looking for is whether there's a change in the economic dynamic that would suggest a contraction in aggregate demand and potential recession (or worse)," said Jeff deGraaf of Renaissance Macro Research in comments shared with MarketWatch via email.

"Sector and Factor performance can help, but we home in on credit, and our work suggests that credit conditions remain supportive of equities as equity performance has been substantially worse than that of like-minded credit."

Should that change, look out below. So far, U.S. economic data have held up reasonably well, despite a few concerning prints regarding consumer sentiment and retail sales and consumption earlier this year. But the Atlanta Fed GDPNow forecast is still anticipating contraction in the first quarter.

Breadth is bad - but it could still get worse

Technical strategists like Adam Turnquist of LPL Research keep a close eye on stock-market breadth, or the number of stocks within an index that are rising, or falling.

Breadth has deteriorated over the past month as the market has slumped. But Turnquist said we haven't reached levels associated with a complete washout just yet. If this is just a correction, then Turnquist doubts that breadth gauges will get there. But if it's something bigger then this reading would likely need to top 80% of 90% before a durable bottom is reached.

The percentage of S&P 500 stocks trading below their 200-day moving averages reached 64.4% on Wednesday, the highest proportion below the crucial trend line since Nov. 1, 2023, according to Dow Jones Market Data.

Turnquist added that he would like to see at least a couple of readings where the number of S&P 500 stocks trading above their 20-day moving averages reaches single-digit territory.

Economic-policy uncertainty is high

Here's another chart that keeps Turnquist up at night.

A measure of U.S. economic-policy uncertainty has reached its highest level since the start of the COVID-19 pandemic. As long as it remains elevated, expect volatility in the market to persist.

The VIX still hasn't reached capitulation territory

Earlier this week, the Cboe Volatility Index VIX, known as the "VIX" or as Wall Street's fear gauge, grazed 30, peaking at just below that level in intraday trading.

According to many analysts, the 30 level is the line between fear and capitulation. Above it, it's easier to make the case that a selloff might be running out of steam.

Over the past few days, the fear gauge has quieted somewhat. It stood at 24.78 on Thursday.

Some have questioned whether the growing popularity of zero-day to expiration - or "0DTE" - options, as well as option-selling strategies embraced by a new generation of derivative income and buffer ETFs and mutual funds, might be distorting Wall Street's "fear gauge."

"We are all dumbfounded why we're not seeing the VIX really ratchet up above 30, with everything going on over the last several weeks," said Prosperity's Bauer.

"But even though it's elevated, the VIX is not showing panic," he said.

Keep an eye on the upcoming economic data

As stocks have slumped, investors have debated whether the selloff is really a momentum unwind as highflying tech names have come under pressure, rather than a genuine growth scare.

So far, economic data have hinted at weakness on the part of the consumer, accompanied by souring confidence in the economy.

Now, investors need to watch to see if this translates into an actual hit to activity. Keep an eye on the retail-sales, personal-consumption and GDP reports set to be released over the next month or so, Bauer said. So far, Fed Chair Jerome Powell has said he doesn't see signs of a recession.

Something to keep in mind

Those afraid that the U.S. could be headed for a bear market should also keep this in mind. According to Carson Group's Ryan Detrick, three bear markets within a single decade would be an extremely rare occurrence.

Investors have already endured two since Jan. 1, 2020: the COVID-19 crash and the 2022 bear market. But U.S. stocks haven't seen three bear markets in a single decade since the 1960s.

After a brief reprieve, U.S. stocks were heading lower once again on Thursday. The S&P 500 and Nasdaq were on track to surpass their losses from last week. Both indexes were on track for their worst weekly showings since September, according to Dow Jones Market Data.

Meanwhile, the Dow DJIA was on track for its worst week since March 10, 2023, when the collapse of Silicon Valley Bank rattled stocks.

-Joseph Adinolfi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

Swiss stocks fell back to negative territory on Thursday, with the Swiss Market Index down 0.25%, as markets mull over fresh economic data prints and new tariff threats from the US.

US President Donald Trump threatened to impose a 200% tariff on wine, champagne and other alcoholic beverage imports from Europe, in retaliation to the European Union's plan to slap tariffs on American whiskey in April. Also in the US: the monthly seasonally adjusted producer price index for final demand stood at zero in February, following a revised 0.6% rise in January.

In the euro area, the region's industrial production rose 0.8% month over month in January after a revised 0.4% decline in the previous month, Eurostat data showed. On a yearly basis, industrial production recorded zero movement.

"While volatile, the January industrial production data does suggest that industrial activity may be stabilising after a long decline that started in 2023," ING said. "The outlook for industrial production is shifting, but the question is when real relief is going to come ... For 2025, a large rebound seems unlikely although some early investments could come through."

Back home, Switzerland's monthly producer and import price index edged up 0.3% in February, compared with a 0.1% growth in the previous month and the consensus of a 0.2% increase. On a yearly basis, Swiss producer and import prices were 0.1% lower, compared with a 0.3% decline in January.

In corporate news, DocMorris swung to a net loss of 97.3 million francs in 2024 from a net income of 82.3 million francs a year before. Net revenue, however, climbed over the period to 1.02 billion francs from 969.5 million francs. The Swiss online pharmacy company's shares dropped 28.69% at closing.

Interroll Holding , on the other hand, jumped 7.39% amid an upbeat outlook, noting "clear indications that the downturn has bottomed out," with product sales improving in 2024 and positive signals from customers. The materials handling company said it achieved "good" profitability margins in 2024 against a challenging economic backdrop.

In Milan, the FTSE MIB Index dropped 307 points or 0.80 percent on Thursday.

Losses were led by Davide Campari-Milano (-4.37%), Saipem (-3.27%) and STMicroelectronics (-2.64%).

Offsetting the fall, top gainers were Nexi (2.50%), Banca Monte dei Paschi di Siena (2.20%) and MFE-MediaForEurope (2.16%).

U.S. stocks extended their losing streak on Thursday, weighed down by renewed trade tensions and persistent market volatility. Equities struggled to find footing, with major indices slipping deeper into a sell-off that has now stretched over three weeks.

The S&P 500 fell over 1 percent, inching closer to official correction territory with a near 10 percent drop from its February peak. The Dow Jones Industrial Average slid 433 points, or 1.03 percent, marking its fourth consecutive day of losses, while the Nasdaq Composite dropped 1.8 percent as heavyweight stocks like Tesla and Apple tumbled 4.3 and 2.6 percent, respectively.

Also read: Forex reserves record biggest weekly gain since 2021

Trade anxieties escalated after former U.S. President Donald Trump threatened a 200 percent tariff on European alcoholic beverages, including wines and champagnes, in response to the EU’s recent 50 percent tariff on American whiskey. Trump’s comments, posted on Truth Social, sent ripples through the market, adding to investor unease about growing protectionism.

The uncertainty around U.S. trade policy has unsettled markets throughout the month, with this week’s losses intensifying. The S&P 500 and Nasdaq are poised to drop 3.4 percent and 3.8 percent, respectively, for the week, while the Dow is on track for a 3.9 percent decline, its worst weekly performance since March 2023.

Stocks continued their slide even as fresh inflation data offered some relief. February’s producer price index (PPI), a key gauge of inflationary pressures, was unchanged from the previous month, defying expectations of an increase. This followed a softer-than-expected consumer price index (CPI) reading earlier in the week, signalling a possible cooling of inflation.

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Yet, despite these figures, analysts remain cautious. Concerns over Trump’s trade policies continue to cast a shadow over investor sentiment, fueling doubts over the Federal Reserve’s next moves on interest rates.

With policy uncertainty and trade risks keeping investors on edge, markets remain vulnerable, and the path forward remains far from clear.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.

In Paris, the CAC 40 Index fell 47 points or 0.58 percent on Thursday.

Leading the losses are Pernod Ricard (-4.12%), STMicroelectronics (-2.97%) and Essilor (-2.56%).

Top gainers were Unibail Rodamco (2.76%), Teleperformance SE (2.54%) and Vivendi (1.82%).

Frankfurt's DAX closed 0.6% lower at 22,546 on Thursday, though it recovered from intraday lows, amid rising US-EU trade tensions.

President Trump threatened 200% tariffs on European alcoholic beverages after the EU imposed a 50% tariff on American whiskey in retaliation for previous US duties.

Geopolitical concerns also weighed on sentiment amid ongoing uncertainty over a potential ceasefire.

The Russian president backed a truce “under certain conditions” but insisted it must ensure lasting peace.

Earlier, Moscow had voiced skepticism about a ceasefire, viewing it only as a temporary advantage for Ukraine.

Locally, the German parliament continued discussions on potential debt brake reforms. In corporate news, Daimler Truck shares slumped amid fears that the US could ease emissions limits for trucks, potentially reducing demand for cleaner vehicles.

Hugo Boss targeted higher 2025 profits but remained uncertain on sales growth, while Hannover Re reported record earnings.