S&P 500 pulls back into bear market territory; Continued selling of the stock market

It’s been decades since stocks fell for such a long time. The Dow Jones Industrial Average is heading for its eighth consecutive weekly loss, the longest such streak since 1932, near the height of the Great Depression. The S&P 500 and Nasdaq are on track for their longest streak of weekly losses since 2001, after the internet bubble burst.

Investors say the driving force behind the sell-off is growing concerns US health and the global economy. Money managers spent the first few months of the year worrying that Fed rate increases would lead to huge losses in expensive stocks that fueled the market’s remarkable rally over the past several years. Investors have fled tech stocks, withdrawing billions of dollars in money tracking the Nasdaq. Higher interest rates tend to weaken the attractiveness of companies that count on making big profits after years.

This week, the pain has spread beyond the tech sector, alarming many investors. Major retailers reported that their profits were hit by rising costs and supply chain disruptions, leading to sell-offs that led to target and

Walmart‘s

The worst one-day drop since the Black Monday crash of 1987. As investors assess how inflationary pressures and slowing growth will affect corporate earnings in the coming months, stocks of everything from banks to REITs to grocery store chains have plummeted, too.

The ferocity of the selling sent investors and analysts a powerful message: There are few, if any, safe parts for the stock market this year. On Friday, even energy stocks, which benefited from higher oil prices, fell along with the broader market.

“Obviously in a very short space of time, we’ve gone from pandemic to inflation fear to now, serious growth concerns,” said Brian Levitt, global market strategist at Invesco.

Economists at Goldman Sachs estimate there is a 35% chance the US economy will enter a recession sometime within the next two years. An economic slowdown has historically been bad news for stocks: Back in World War II, the S&P 500 fell an average of 30% from peak to trough during recessions.

Analysts said that until the Fed convinces investors that it can tighten monetary policy and drive inflation without causing deflation, markets are unlikely to stabilize. The central bank’s job will be made more difficult by factors outside its control that have added to inflationary pressures this year, including China’s non-proliferation policy and Russia’s invasion of Ukraine.

“We still need to build more evidence to convince markets that an easy landing is possible,” said Aaron Say, multi-asset strategist at Pictet Asset Management.

Government bonds rose on Friday, benefiting from an influx of investors toward assets that tend to do well in times of economic stress. The yield on the benchmark 10-year US Treasury fell to 2.795% on Friday from 2.854% on Thursday, heading for the third consecutive day of decline. Bond prices rise when yields fall.

Meanwhile, disappointing earnings results led to huge moves in some stocks.

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Ross Stores

It fell 24% after its publication drop in sales She said she expects another drop in sales for the current quarter. The retailer, like many other companies, said its results were hurt by higher transportation and labor costs.

agricultural equipment maker

monastery

It’s down 15% despite posting it Increased sales and profits It raised its earnings forecast for the year. The company said supply chain problems have disrupted production and delivery levels, and that high costs of moving materials and merchandise are squeezing its profit margins.

Most of the S&P 500 companies managed to deliver earnings this quarter that beat expectations, said Kiran Ganesh, multi-asset strategist at UBS.

What is less clear is how the companies will operate in the coming months.

“The question is from the next quarter onwards, where we will have the full impact of higher oil prices and the war in Ukraine,” Ganesh said.

Brent crude, the global energy standard, ended Friday up 51 cents a barrel, or 0.5%, at $112.55. Bitcoin, the world’s largest cryptocurrency, fell nearly 5% to $28,734. The coin has fallen nearly 58% since its all-time high in November, while the Stoxx Europe 600 Index is up 0.7% offshore. Asian stocks were also higher, with the Shanghai Composite up 1.6% and Hong Kong’s Hang Seng Index jumping 3%.