Does the S&P 500 always decline on Thursdays? Wall Street warns that the midweek rebound may be short-lived

China Finance News (April 2) (Edited by Ma Lan) The Middle East conflict has continued for five weeks, and so has the chaotic trading in global markets. Some analysts on Wall Street say that during this period the U.S. stock market appears to have a predictable pattern: a strong start to the week, sideways consolidation in the middle of the week, and then a sharp drop on Thursday and Friday.

European and emerging market stock exchanges also show a similar pattern, but the periodicity of the S&P 500 index is especially pronounced. Since the outbreak of the U.S.-Iran conflict, the index has risen cumulatively in the first three days of each trading week, then falls rapidly on Thursday and Friday. Over the past five weeks, the total decline on Thursdays and Fridays has been 9%.

The red box shows the S&P 500 index trend for every Thursday and Friday of the week.

Considering that U.S. President Trump likes to roll out some key policies on weekends when the market is closed, many investors tend to trim their stock holdings over the weekend.

Joe Gilbert, portfolio manager at Integrity Asset Management, told the media that entering the weekend with the risks still unknown is unsettling, and that reducing risk before the weekend is more important than holding positions.

Steve Sosnick, chief strategist at Interactive Brokers, said that bullish sentiment is usually gradually replaced by a risk-averse mood throughout the week. He believes the downward trend in U.S. stocks will continue until the economy returns to normal.

Wrongful optimism expectations
This week has some special circumstances. U.S. stocks were closed this Friday for Easter, meaning there were three days of non-trading time this week. Meanwhile, Trump has consistently shown a willingness to negotiate with Iran over the past two weeks, greatly boosting investors’ optimism. The S&P index rose by more than 3% over the first three days of this week.

However, late on Wednesday, Trump, in a televised address, promised to continue bombing Iran over the coming weeks, causing market optimism to quickly dissipate. S&P 500 index futures fell by 1% after the close, while oil prices surged—indicating that U.S. stocks may fall again on Thursday.

Benjamin Picton, an analyst at Rabobank, said that the optimistic interest over the past 24 hours is likely misguided. Trump’s subtext is that NATO and the Gulf countries must participate in the war to reopen the Strait of Hormuz, otherwise they will have to bear the consequences of the United States withdrawing its troops for the global economy.

Asian markets have already sensed the arrival of a new storm. The Nikkei 225 index closed down 2.38% on Thursday, while South Korea’s Kospi index fell 4.47%. At the same time, spot gold prices quickly dropped, from $4,783 per ounce at Wednesday’s close to below $4,600 per ounce.

Rich Privorotsky, head of Goldman Sachs Delta-One, previously warned in a report that the global stock markets’ sentiment and positioning have shifted to extreme pessimism. Although there are technical rebound conditions in the short term, the macro and earnings logic is still not enough to support investors feeling comfortable going long.