Breaking

S&P 500 Closes Just Above Bear Market: Live Updates - The New York Times
May 20, 2022 7 mins, 36 secs
The stock market has been volatile amid worries about inflation, interest rates and a potential recession.

The S&P 500 recovered from a plunge on Friday, ending the day slightly higher but not before a dramatic swoon that had pushed the index into bear market territory for the first time since the start of the coronavirus pandemic.

Though the Friday afternoon rebound means benchmark remains above the bear market threshold — commonly defined as 20 percent below its last record — there are plenty of other indications of how grim the outlook for stocks has become.

The index ended the week with a loss of 3 percent, its seventh straight weekly decline.

At its lowest point on Friday the index was down 2.3 percent, well below the 3,837 level that serves as the current threshold for a bear market — a symbolically important marker of investor pessimism.

Since World War II, bear markets have almost always been closely accompanied by recessions, with a few exceptions, like the stock market crash of 1987.

But there are recent examples of markets brushing close to a bear market when a recession never resulted, according to LPL Financial.

Before the war and Covid’s resurgence in China, the International Monetary Fund was projecting global growth of 4.4 percent this year.

The drop in stocks this year has come as economists have lowered their forecasts for the economy.

growth to 2.4 percent for this year (down from 2.6 percent) and 1.6 percent for 2023 (down from 2.2 percent).

This year’s market drop could be hitting at a time where it could do the most damage to a large and growing group of Americans: Baby Boomer retirees.

And if you can handle it, a falling stock market can be an opportunity for people with long horizons.

Once critical expenses are accounted for, and as long as you can handle some short-term losses, broadly diversified, low-cost index funds are a good way to invest in the total stock market.

stock market has always recovered from declines in the past.

After an incredible rally, the S&P 500 rose from a drop of more than 1.5 percent to a very slight gain for the day in just 30 minutes, closing above the threshold where the index would be considered to be officially in a bear market.

The index is still down more than 18 percent from January.

It will be a close call whether the S&P 500 ends the day in a bear market — it has been flirting with 3,837.25 all afternoon, and now it is well above that number.

Something that could be adding fuel to Friday’s drop is that today is the expiration date for stock options, where traders can place bets with brokers that a stock will rise or fall.

The swift decline in stock prices is the latest blow to Americans who are invested in the markets, whose savings are taking a beating while they struggle to keep up with rapid inflation.

climbed by 5.5 percent in the year through April, but the Consumer Price Index picked up by an even-faster 8.3 percent.

Stock market corrections — when stocks drop 10 percent from their latest peaks — are not uncommon.

But it’s rare for a correction to turn into a bear market, a decline of 20 percent.

The S&P 500 narrowly avoided closing in a bear market on Friday, in what would have been only its third slide that big since 2000.

One big decline in 2018 came extremely close to bear market territory: By Christmas Eve of that year, as political turmoil and former President Donald J.

The next trading day, the index surged 5 percent, and it recovered in the months after.

The sell-off was not as dramatic as previous declines, like that of the financial crisis, but it was a year in which nearly every type of investment posted negative returns.

There is disagreement on the correction and bear market thresholds, both when it comes to their precise definitions and their use.

The recent descent to bear market territory has been a different beast for Wall Street’s biggest banks after they feasted on red-hot deal-making early in the pandemic and posted record profits last year.

The S&P 500 closed slightly higher on Friday, after spending much of the afternoon below the threshold for a bear market, generally pegged at a 20 percent fall from the most recent high.

But growing uncertainty and concerns about inflation late in the year took some shine off that record performance, and the mood turned more dour when the banks reported first-quarter earnings last month.

The 20 percent threshold for a bear market isn’t an official designation, but there are many ways to show how grim things have gotten in the stock market.

This week's drop, about 4.5 percent so far, is the worst showing in that bad stretch.

Investors are reassessing the premise that justified Tesla’s astronomical stock price and made its founder, Elon Musk, the richest person in the world.

But Tesla’s shares have declined more than 40 percent since April 4 — a much steeper fall than the broad market, vaporizing more than $400 billion in stock market value.

Tesla’s market share in China topped 2.5 percent in the first quarter of 2022, closing in on luxury carmakers Mercedes-Benz, BMW and Audi.

Tesla accounted for three-quarters of the electric cars sold in the United States last year.

But two models — the Model 3 sedan and Model Y sport utility vehicle — accounted for 95 percent of Tesla’s sales.

Its next consumer vehicle, a pickup truck, has been delayed many times and is not expected until next year at the earliest.

Jesse Toprak, an auto industry veteran who is chief analyst at Autonomy, a company that offers electric cars by subscription, said that Tesla’s market share will fall below 40 percent by the end of 2023, though its sales will continue to grow as the overall market expands.

The churn at Tesla is obvious.

“You can’t treat your workers poorly in a tight labor market like we have,” said Mr.

A market downturn like this may change the calculus to first draw down on investment vehicles like 401(k)s.

Defining a bear market as a 20 percent downturn is often described as an old Wall Street tradition, but as Robert J.

That 20 percent threshold is arbitrary and wasn’t widely used in the United States until the 1980s, Professor Shiller, a Yale economist, found.

Yet, bears can be scary animals, and repetition of a negative narrative about the stock market could help to propel the market downward even more.

Predicting when a bear market will end and the next bull market will start is a fruitless task, with one big exception: Intervention by the Federal Reserve would be a crucial sign of a change in fortune for the stock market.

At the moment, the Fed is raising interest rates and about to start selling bonds in its portfolio, measures aimed at slowing the economy and bringing down inflation — and also contributing to the fall in stock market prices.

Peter Berezin, a stock market strategist at BCA Research who is known for his unconventional takes, says he is “back to bullish.” Mr.

The effect the Fed is having on stock and other asset markets this year is compounded by the fact that central banks around the world are lifting their own policy rates, too, as high inflation hits many countries

The bear market in stocks is unlikely to change the Fed’s course in the next few months, strategists said

The last bear market was in 2020, just as the coronavirus began spreading globally

This added trillions of dollars to these companies’ market values, giving them an outsize influence on broad-based stock market indexes like the S&P 500

The tech-heavy Nasdaq composite index is down nearly 30 percent from its mid-November high

As the S&P 500 index has drifted toward a bear market, tech stocks have paced the decline

The technology sector accounts for nearly 30 percent of the value of the S&P 500, and just five of the industry’s largest companies — Alphabet, Amazon, Apple, Meta and Microsoft — comprise about 20 percent of the index

Since the start of the year, when the S&P 500 hit its peak, the fall of these tech giants explains much of the overall decline in the stock market:

Alphabet is down 26.3 percent this year, through afternoon trading on Friday

The recent slide in stocks has pushed the S&P 500 perilously close to a bear market, Wall Street’s label for a sustained downturn in the markets that reflects serious pessimism about the outlook for the economy

A stock or an index enters a bear market, at least by most conventional definitions, when it has dropped 20 percent from its last peak

After spending much of Friday below that threshold, the S&P 500 recovered and closed 18.7 percent down from its Jan

The Nasdaq composite, a benchmark that’s heavily weighted toward technology stocks, has been in bear market territory since early March

The 20 percent trigger for a bear market — like the 10 percent trigger for what investors call a “correction” — is a somewhat arbitrary threshold

There is skepticism about the use of the terms correction and bear market, whose precise definitions have been in use only since the 1980s

RECENT NEWS

SUBSCRIBE

Get monthly updates and free resources.

CONNECT WITH US

© Copyright 2024 365NEWSX - All RIGHTS RESERVED