‘Dead cat bounce’ refers to a sharp rise in stocks before they freefall or resume a downward trend
The S&P 500 futures and contracts that track tech-heavy Nasdaq 100 dropped 0.7% and 0.9%, respectively, on Thursday, ending the two-day rally after the President signaled a potential tariff relief.
The drop makes traders question whether the Wall Street rebound was a true recovery or a “dead cat bounce.”
A dead cat what?
It is a financial market term that refers to a sharp rise in stocks before they freefall or resume a downward trend. It is based on the notion that even a dead cat dropped from a great height will bounce.
Market behavior is often attached to uncertainty stemming from political, economic and global conditions.
Yesterday’s stock slide echoed European market jitters over President Donald Trump’s unpredictable trade policy. He recently bashed Federal Reserve Chair Jerome Powell for not lowering interest rates. He warned that without rate cuts, the US economy could slow down.
Businesses are on edge and have begun bracing for volatility, with over 90% of S&P 500 companies citing tariff risks in their earnings calls this week.
- Procter & Gamble (P&G), one of the largest producers of detergents, soaps and diapers, said tariffs could cost the company nearly $1.5 billion annually.
- Nestle, the world’s largest packaged goods maker, warned of Trump’s tariffs’ indirect impacts despite strong sales, causing its shares to dip 0.7%.
- Other big conglomerates like PepsiCo, Merck and Chipotle trimmed or scrapped their yearly forecasts, pointing to rising costs and uncertainty.
- Airlines like American, Southwest and Delta are also feeling the squeeze. Some plan to reduce the number of flights offered, fearing consumers might pull back on travel spending.
In the end, consumers will be the most affected. P&G, Unilever, and Hasbro have warned that price hikes are likely as tariff costs pile up.
Adding to the woes, the US dollar also slid 0.5% to $1.137 per euro, nearing a 3.5-year low.
President Trump has indicated that he is open to lowering the 145% duty placed on Chinese imports, providing a glimmer of hope.