MW Markets are dealing with a new kind of shock. The S&P 500 might not have bottomed yet, says Goldman Sachs

By Barbara Kollmeyer

Economic data may need to stabilize before the stock market can.

Stocks are about to close out another volatile month of trading not all that far from where it started.

The S&P 500 SPX is looking at a 0.9% drop for April, which is an improvement on a 5.7% March drop, thanks to calm seen in the latter half of the month. Nonetheless, many investors and Wall Street watchers remain on edge.

Goldman Sachs' macro strategist Vickie Chang, in our call of the day warned investors to strap in, as stocks may have to fish for a lower bottom.

Some have hopefully pointed to the S&P 500's April 8 low of 4,982 as a potential bottom. As Chang pointed out in a note Tuesday, during past corrections, troughs in economic activity could be counted to signal a floor for stocks.

"What matters now is whether the current episode is more like past 'shock'-driven corrections where the tariff shock having seemingly peaked could be enough to mark the market bottom, or whether this will ultimately be a scenario where the economic data needs to stabilize first," she said.

As markets are dealing with a "new kind of shock," it's tough to have faith that simply being through the worst will provide reassurance the worst is over for markets, she said. In episodes where the market found it tougher to track the source of the weakness, the market failed to trough until growth itself bottomed.

The strategist looked at past selloffs of more than 15%, and the macro conditions marking those bottoms. Her chart shows episodes of peak-to-trough hits of 15% or higher, categorized by relatively clear factors.

If investors can hope for a repeat of the market bottoming near the trough in economic activity such as in the past, Chang said that could happen around the third quarter of this year, based on their estimates. A recession, of course, would mean a later trough.

In a recession scenario, Chang said there's "significant vulnerability" even if the underlying "shock" has passed, for these three reasons:

-- Shock-driven corrections have seen a "meaningful reversal," and not just a peak in the pressure source, meaning "the tariff reversal may need to be more dramatic to be equivalent to those past peaks."

-- The unemployment rate is crucial for risk pricing, and it's been a good while since job losses and portfolio losses for investors happened simultaneously.

-- The 19% drawdown so far is mild relative to past recessionary drawdowns, "and would have entirely taken place before economic damage is seen, which would be historically unusual."

Chang said putting faith in a continued market recovery from here means a stronger belief that a recession scenario isn't setting up, and that markets can keep looking through any data weakening.

"We think the balance of risks still argues for expecting renewed declines in equity prices from current levels and for adding downside protection, especially if further relaxation makes that protection cheaper," she said.

Read: Why are stocks climbing when a recession looks more likely? Here's one possible reason.

The markets

Nasdaq-100 futures (NQ00) are lower, followed by those for the S&P 500 (ES00), with Dow industrials (YM00) futures flat. Gold (GC00) is dropping hard and oil prices (CL00) are weak.

   Key asset performance                                                Last       5d      1m       YTD      1y 
   S&P 500                                                              5560.83    5.16%   -1.28%   -5.45%   10.43% 
   Nasdaq Composite                                                     17,461.32  7.12%   0.07%    -9.58%   11.52% 
   10-year Treasury                                                     4.173      -22.00  4.60     -40.30   -46.60 
   Gold                                                                 3320       -2.12%  5.45%    25.79%   44.52% 
   Oil                                                                  59.63      -6.15%  -16.18%  -17.03%  -26.88% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Caterpillar $(CAT)$ reported weaker-than-forecast results, though shares are up.

Tech biggies Meta $(META)$(preview here), Microsoft $(MSFT)$ and Qualcomm $(QCOM)$ (see preview) report after the close.

Super Micro Computer $(SMCI)$ is down 15% after warning of much weaker-than-expected results to come. Snap (SNAP) tumbled after the Snapchat parent warned over ad sales and wouldn't provide guidance.

Visa (V) reported results that pointed to still-healthy consumer spending. But Starbucks shares $(SBUX)$ slid after the coffee giant's results missed forecasts.

Read: Starbucks customers are giving the company over $200 million of free money

President Donald Trump late Tuesday rebooted criticism of Fed Chair Jerome Powell, saying he's "not really doing a good job" and that the central bank chief knows less about interest rates than him.

ADP employment data is coming at 8:15 a.m., followed by first-quarter GDP at 8:30 a.m.

The Chicago Business Barometer at 9:45 a.m., then at 10 a.m., the March reading of personal consumption expenditure as well as pending home sales

Data from China showed a gauge of new export orders fell to its lowest since 2022, with overall manufacturing the weakest in over a year.

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The chart

Jefferies shared a chart with clients showing just over half of U.S. consumers they surveyed reported making fewer impulse purchases in April versus March. "Given a large proportion of American consumption is driven by impulse, and taken in conjunction with still-strong spending patterns, we find it rather foreboding that consumers are reporting much more of their spending is intentional," said a team of analysts led by Randal Konik.

Top tickers

These were the most active tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   GME     GameStop 
   SMCI    Super Micro Computer 
   PLTR    Palantir Technologies 
   AAPL    Apple 
   TSM     Taiwan Semiconductor Manufacturing 
   AMZN    Amazon 
   META    Meta 
   NIO     NIO 

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-Barbara Kollmeyer

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April 30, 2025 07:26 ET (11:26 GMT)

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