The benchmark S&P 500 index traded down 20% from its Jan. 3 record close in volatile trading on Friday, as investors worried about the impact of rising inflation on earnings and the impact of interest rate hikes on economic growth. A shutdown of 20% or more below this level would confirm that the S&P 500 is on the bear market for the first time since the coronavirus epidemic in 2020, following the Wall Street plan.
Tech-heavy Nasdaq is already in a bear market, down 30.7% from its record close in November 2021.
Ten of the 11 major S&P sectors declined, while consumer sentiment and industries declined by 3.5% and 2.2%, respectively.
Apple Inc, Google-owned Alphabet Inc, Nvidia Corp and Tesla have slipped between 2.5% and 9.9%, the heaviest on the S&P 500 and Nasdaq. Both indices rose above 1% in morning trade.
Shares of Deere & Co fell 12.1% and heavy equipment maker had the biggest pull in the industrial sector after quarterly revenue cuts.
“In this bear market process, it’s very common for these internal swings and cyclic countermeasures to occur,” said Will Nasgovitz, CEO of Heartland Advisors.
“We’re probably going to see a bear market (in the S&P 500). The market is reflecting that the economy is not very long, there are some cracks in the foundation. ”
Disappointing forecasts from major retailers Walmart Inc. and Target Inc. have shattered market sentiment this week, adding evidence that rising prices are beginning to hurt the purchasing power of U.S. consumers.
The S&P 500 and Nasdaq are set for the seventh consecutive week of their losses, their longest streak since the dotcom bubble ended in 2001.
The Dow is on its way to its eighth consecutive weekly fall, the longest since 1932 during the Great Depression.
So far this year, the three main indicators have fallen between 15.1% and 28.6% as investors adjusted to supply-chain snurl, lockdown in China, geopolitical uncertainty over the Ukraine conflict and rising US Federal Reserve rates.
Traders are pricing 50-basis point rate hikes by the US Federal Reserve in June and July.
At 12:54 pm ET, the Dow Jones Industrial Average was down 439.27 points, or 1.41%, at 30,813.86, the S&P 500 was down 69.83 points, or 1.79%, at 3,830.96, and the Composite was down 329.5 points at 11,097.11.
The expiration of the monthly options contract on Friday will increase the trading volume and may add volatility especially towards the end of the session.
Ross Store fell 23.8% after discount clothing retailer cut its 2022 forecast for sales and profits, while VF Corp, owner of the van brand, gained 3% in the 2023 revenue outlook.
The numbers are declining for the 2.84-to-1 ratio on the NYSE and for the 2.85-to-1 ratio on the Nasdaq.
The S&P index hit a new 52-week high and 47 new lows, while Nasdaq recorded 10 new highs and 285 new lows. (Reporting by Amrita Khandekar and Devik Jain in Bangalore; Edited by Shaunak Dasgupta and Arun Kayur)