One of the catalysts behind the swings in Wall Street sentiment is mixed data on the U.S. economy.

Early in the month, labor market data showed that the economy continued to add jobs at a healthy rate, driving the unemployment rate lower without fueling wage inflation.

The data supported the soft landing scenario, an economy of moderate growth rates and low inflation.

It's an ideal world for equity investments, as it helps lower interest rates while boosting earnings growth, meaning better valuations and higher equity prices.

More recently, inflation data showed that price hikes have begun to ease around the nation, adding to the soft-landing scenario. Thus, the equity rally was seen in recent trading sessions.

Then came the retail sales yesterday, which showed that consumer spending—the most significant driver of U.S. economic growth —declined for a second month, supporting the hard landing scenario. As a result, Wall Street changed direction, with all major equity averages heading south again.

"The high running inflation, together with the worry that FED's aggressive policy may be leading the economy into a recession, has pushed Americans to cut their spending for two consecutive months while waiting for a more clear and reassuring outlook for the months to come," Guido Petrelli, CEO of Merlin Investor, told International Business Times.

Another catalyst behind the change in the mood on Wall Street is ongoing talks by executives from almost every sector of the economy about an impending recession. For instance, last week, the CEOs of the nation's big banks stated that they are preparing for a recession, and some have set aside more reserves to deal with the prospect of worsening credit conditions.

Some executives have taken even more drastic measures like employee layoffs. Microsoft this week announced the layoffs of 10,000 employees, following similar moves by other large tech companies like Salesforce.com, Alphabet, and Meta.

A third catalyst behind Wall Street's wild ride is a mixed fourth-quarter earnings bag. Last week, large banks reported solid earnings thanks to rising interest rates that boosted net interest income, the core source of profitability for traditional banks.

This week the situation is quite different. Goldman Sachs and Morgan Stanley disappointed Wall Street due to the drying up of the investment banking business in a turbulent market. On Thursday, lackluster earnings from Alcoa and P&G added to the hard-landing scenario fears, helping lower major equity averages.

Petrelli remains optimistic about Wall Street's future.

"Overall, the drop in inflation, retail spending, and production prices seem to be aligned, despite the FED's aggressive policy that so far seems to be working," he said.