Wall Street‘s new attempt at recovery ran out of…fuel, as the initial gains of over 1% recorded by all indices gradually evaporated, leaving them all in negative territory.

This confirmed analysts’ warnings that US market sentiment will remain volatile in the short term, as fears about the economy’s trajectory are sustained as the Fed delays starting monetary easing.

Thus, the Dow Jones finally “closed” down 0.60% at 38,763 points, firmly below the 39,000 mark, the S&P 500 was down -0.77% at 5,199 points and the Nasdaq fell sharply by 1.05% to 16,195 points.

In the bond market, yields gained ground with the 10-year yield rising to 3.965% and the 2-year yield climbing to 4.005%.

Wall Street’s divergence from other major markets in Asia and Europe, which managed to complete a two-day recovery from Monday’s dramatic sell-off, confirms how vulnerable the US stock market remains as it has entered a phase of uncertainty following the successive records of the first half of the year and excessive euphoria about the resilience of the economy and the potential of the technology and artificial intelligence sectors.

Uncertainty about the resilience of an economy that has now begun to “buckle” under the weight of high interest rates while the Fed remains in a wait-and-see mode, uncertainty about the trajectory of corporate performance as consumption is squeezed, and uncertainty about how quickly and at what rate the huge investments in artificial intelligence will pay off.

Along with this, of course, there are the individual factors of geopolitical instability, the decline of the popular yet lucrative carry trade, and domestic political rivalry as we are now in the run-up to the November elections. However, by far the number one thorn is found in the Fed’s excessive reluctance to change course, lagging for the first time behind both the ECB and the Bank of England who have begun cutting interest rates.

Turning the economy’s smooth landing into a bumpy descent, if not a recession, is not a visible risk for now, but it is a threat that cannot be ignored by the market.

It is no coincidence that the so-called VIX fear index, which soared to near 65 points on Monday, may have now retreated significantly to around 28 points, but it remains well above where it was just at the beginning of the month.

Accordingly, many analysts are pointing out that the market will continue to be highly volatile in the coming period precisely because it will be vulnerable to these fears while it waits for a clear reassuring move from the Fed. And despite the fact that traders are still fond of scenarios of possible early intervention by the Fed, in practice this is considered unlikely, given that the board makes its decisions based on stylized economic data rather than stock market turbulence and investor advice. Which means the Fed will remain focused on the September meeting.

“There have been some assurances in recent days that things will calm down somewhat. But there are still a number of unknown factors on the horizon, such as with the carry trade impairment and geopolitical instability,” Charlie Ripley of Allianz Investment Management told CNBC.

Especially in today’s session an additional negative factor was the weak demand in the new auction of 10-year bonds totaling $42 billion, indicating that the recent rally has come full circle.

It should also be noted that investors have started to turn their attention to the new inflation data, which will be released next week.

On the equity front, tech stocks and semiconductor companies that had moved higher in the early hours were eventually targeted for significant liquidation. Among them, Nvidia, Tesla and Super Micro Computer came under the most pressure after their disappointing results.

The poor financial results also cost Airbnb’s stock, which was forced to revise its outlook for the year downward as well, as well as Reddit and Rivian Automotive.

Among the session’s gainers, cybersecurity firm Fortinet stood out as the biggest gainer in the S&P 500 thanks to strong results, while good performance sent shares in Shopify, Lumen Technologies, Upstart Holdings and Sunrun higher.