Investing.com -- Ongoing volatility in equities is expected in near-term, although shares should trade higher in the coming 6-12 months, according to analysts at UBS.
US stocks widely edged up in early trading on Wednesday, with artificial intelligence-darling Nvidia (NASDAQ:NVDA) in particular reversing an earlier loss stemming from a Bloomberg News report that it had been sent a subpoena by the US Department of Justice.
In the prior session, the benchmark S&P 500, 30-stock Dow Jones Industrial Average, and tech-heavy Nasdaq Composite all recorded their biggest daily percentage fall since August. The so-called Magnificent Seven tech giants dropped, including Nvidia, which decreased by almost 10% and shed a record $279 billion in market capitalization.
Sentiment was dented by weaker-than-expected results from the Institute for Supply Management's monthly measure of US manufacturing activity, stoking worries of a slowdown in the world's largest economy. In a note to clients, the UBS analysts added that some seasonality could also have factored into the negative sentiment that weighed on US stock markets on Tuesday.
"The S&P 500 has declined in September in each of the last four years and seven of the last ten. This historical context may help explain why Tuesday's move could be signaling a broader risk-off sentiment as investors brace for potential volatility," the analysts said.
Attention is now fixed on the US labor market, with the release of the all-important monthly nonfarm payrolls report due out on Friday. Figures last month showing the unemployment rate hitting a three-year high of 4.3% in July sparked fears of a possible downturn in the US economy, leading to a sharp -- albeit short-lived -- slide in stocks on Wall Street.
Meanwhile, the Federal Reserve will likely be monitoring the labor market numbers as policymakers gauge a potential interest rate cut at their next gathering later this month.
"Another disappointing jobs report could heighten recession fears and prompt the Fed to take more aggressive action," the UBS analysts said.