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  • The S&P 500 saw selling pressure following a record open, dropping from the 3920s to lows in the 3880s.
  • Dip buyers have pushed the index back above 3900 again as positive fundamentals continue to underpin market.

Having opened at record highs above 3920, the S&P 500 (and US equity markets more broadly) came under selling pressure from about 15:10GMT. The S&P 500 index dropped from the 3920s to hit lows in the 3880s, down nearly a percent at worst levels. However, equity market bulls appear to have taken the dip as an opportunity to add to longs and the index quickly bounced back above the 3900 level. At present, the S&P 500 is down around 0.2% on the day.

Driving recent volatility

As to the reasons behind the slip; no particular headline, piece of news or theme appears behind recent price action. Note that stocks have been pressing higher at quite an aggressive pace over the last few days (the S&P 500 opened Wednesday trade up more than 5.0% since the start of the month), so a bout of profit-taking driven downside should not come as a surprise to anyone.

Some market commentators attempted to link the pickup in volatility in the S&P 500 to price action in Tesla; TSLA shares started the US session on the back foot but selling intensified as CEO Elon Musk began tweeting (seemingly in just) about how he had bought his toddler Dogecoin (which is now up 10% on the day as a result). Musk’s “trolling” of Twitter’s crypto/financial community comes in the context of Tesla announcing a $1.5B investment in Bitcoin and might be troubling some Tesla investors. TSLA shares are down about 3.5% and give the stock’s size and weight in the S&P 500 index, this does appear to have weighed on the index slightly.

The fact that the dip below 3900 was aggressively bought by investors, however, is somewhat unsurprising given no change to any of the major positive fundamentals factors that have been driving stocks higher in recent days; Congress is still expected to deliver another big stimulus package, the Fed will stay dovish (with soft US Consumer Price Inflation data on Wednesday feeding into this narrative), vaccine rollouts continue and infection rates in the US continue to drop and earnings continue to (mostly) beat analyst forecasts.