S&P 500 Index and VOO stock drops as Wall Street bank predicts more downside

The S&P 500 Index and VOO, its biggest exchange-traded fund, plunged for three consecutive days, reaching its lowest level since November last year. 

Summary

• The S&P 500 Index continued its strong downward trend.
• JPMorgan analysts expect the index to continue falling this month.
• The index may still rebound later this year if Donald Trump capitulates on his war.

The blue-chip index, which tracks the biggest companies in the United States, dropped to $6,637, down by over 5.2% from its highest point this year.

This retreat happened as the crisis in the Middle East escalated, pushing crude oil prices to the highest point in years. Brent and the West Texas Intermediate rose to over $115 before paring back the gains.

The rising crude oil prices pushed US bond yields higher, with the 10-year rising to 4.17% and the 30-year hitting 4.766%. This surge is a sign that market participants expects the Federal Reserve to maintain a hawkish tone this year.

JPMorgan predicts a S&P 500 Index crash 

Wall Street analysts are getting antsy about the market. In a research note, analysts at JPMorgan predicted that the index will move into a correction if the war continues. 

Dropping into a correction, which is defined as a 10% drop from its peak, will push it to $6,300, its lowest level since August last year.

However, the analyst noted that signs of an off-ramp on the war in Iran will invalidate the bearish outlook. He noted:

Similarly, Yardeni, a top research company, boosted its odds of a market meltdown to 35% from the previous 20%.

Still, as we wrote earlier, there is a possibility that the S&P 500 and VOO stock will bounce back as President Donald Trump often pays close attention to the stock market and inflation. As such, there is a possibility that he will start to capitulate soon.

Looking ahead, the S&P 500 Index will react to the upcoming US consumer inflation report, which will come out on Wednesday. 

Economists expect the report to show that the headline Consumer Price Index rose to 2.5% in February. A higher inflation than that, coupled with the rising oil prices, may also push Trump to capitulate on his war.

The index will also react to the upcoming Oracle earnings, which will come out on Tuesday. Oracle has become a major player in the artificial intelligence industry thanks to its huge backlog.