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  • US equity markets saw choppy trade on Wednesday but ultimately finished the session little changed.
  • A bout of selling was pounced on by dip buyers and crucial sentiment driving fundamentals remain positive.

It was a choppy/mixed day for US equity markets, but indices for the most part were little changed. Major US indices saw a bout of selling pressure shortly after the 14:30GMT cash open, though most of these losses were subsequently pared. Having opened at record high levels above the 3920 mark, the S&P 500 dropped to lows in the 3880s, before recovering to close the session back above 3900 mark, down 0.06% on the day. The Nasdaq 100 saw slightly larger losses of about 0.2%, while the Dow gained 0.2%.

No specific catalyst seemed behind the brief bout of mid-session volatility, though some pointed to a pick up in volatility in TSLA shares (the stock was one of the underperforms in the S&P 500 on the day and ended the session down more than 5%). Chatter amongst desks also spoke of a big sell programme in eMini S&P 500 futures that apparently saw 120K of the futures contracts sold, weighing on global equity markets momentarily.

The recovery from lows was seemingly aided by reassuring comments from Fed Chair Jerome Powell; the Fed Chair largely stuck to the usual script, reaffirming the bank’s intentions to maintain rates at near-zero until its mandate had been met and to continue asset purchases at a rate of $120B per month until “substantial progress” has been made towards the maximum employment and inflation goals.

In the end, it was perhaps unsurprising to see equity bulls take the brief stumble as an opportunity to buy the dip given the outlooks for further US fiscal stimulus, continued Fed accommodation, vaccine rollouts, dropping infection rates and the post-pandemic recovery all still look broadly positive. Softer than forecast US Consumer Price Inflation for January that was released at 13:30GMT does not materially change the outlook for any of the above listed crucial drivers of sentiment but may have underpinned stock market sentiment given the soft inflation numbers did trigger a drop in US bond yields and bull flattening of the UST curve (making equities a comparatively more attractive investment).