European markets stabilize after recession fears in US Oil, currency fluctuations

(MENAFN) In the wake of Monday's dramatic USD1 trillion global market sell-off, significant investors were notably active in a manner typically seen with retail traders: they capitalized on the dip. As novice investors retreated from the market, hedge funds, known for betting on market movements, seized the opportunity to purchase U.S. stocks at a rapid pace, reversing the severe declines observed earlier. Data from Goldman Sachs reveals that hedge funds have been snapping up individual stocks with an intensity not seen since March, signaling a shift in market dynamics.

An analysis by JPMorgan Chase & Co. highlighted that during the market's decline, investors absorbed USD14 billion in stock sales, contributing to a 3 percent drop in the S&P 500. This significant buying activity on one of the worst days of the year for markets underlines a strategic move by professional traders who believe that the recent fluctuations are an overreaction to economic data, which has not yet confirmed a U.S. recession. The subsequent sharp recovery in stock prices from Tuesday's lows suggests that hedge funds may have been prudent in their approach.

On Tuesday, the S&P 500 rebounded by about 1 percent following its steepest decline in nearly two years, and the Nasdaq 100 posted similar gains. The Cboe VIX, Wall Street's main fear gauge, also retreated from its highest levels since 2020. Despite ongoing concerns about a potential recession, which contributed to the Nasdaq 100 entering correction territory and the S&P 500 dropping 7 percent, some investors view the market’s recent volatility as an opportunity rather than a threat, akin to finding a desired item at a discount. 

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