Traders Have S&P 500 Comebacks Fading at Historic Pace

Surprised that the S&P 500 swung into the green Friday? Don’t worry. Just wait. It’ll fall again after the next opening bell.

That’s been the August trend, at least, thwarting any effort to revive the US stock market rally since it stalled early this month.

Nineteen trading sessions have come and gone in August without a single back-to-back gain in the S&P 500. If that continues, it will be the first month without two consecutive up days since May 2010 in the aftermath of the global financial crisis.

The pattern illustrates the lack of conviction among investors after the sharp run-up fueled by artificial intelligence breakthroughs, better-than-expected earnings and speculation the Federal Reserve would shift to cutting interest rates once the economy cooled. By the end of July, the S&P 500 had risen almost 30% off its October lows.

The mood has since shifted as the surprising resilience of the economy and sticky inflation has markets expecting the Fed to hold rates high. On Friday, Chair Jerome Powell reinforced that conviction during a long-awaited speech in Jackson Hole, Wyoming, where he emphasized that the central bank stands ready to keep raising interest rates, if needed, to keep pulling down inflation.

“The equity market ran very hot into late July, and it’s in this cooling, what’s-next phase,” said Todd Sohn, ETF and technical strategist at Strategas Securities LLC. “Some clarity on interest rates would certainly help. Is the Fed done? That’s probably the next catalyst.”

Flip Flopping Through August