The S&P 500 fell sharply on Thursday as the benchmark struggled to avoid a bear market. Investors continue to dump equities, fearing that a rise in the Federal Reserve rate could push the economy into a recession to fight rapid inflation.
The broader market index fell 0.7%, which put it down nearly 19% from its intra-day record reached in January. It sits at more than 18% below the record closing level. This will mark a bear market below its all-time high of 20% or more, the first since the March 2020 epidemic sale.
The Dow Jones Industrial Average lost 348 points, or 1.1%, one day after experiencing its biggest one-day fall since 2020. The Nasdaq Composite was flat, though it went into profit and loss on Thursday.
“The key for investors is to brace for increased volatility,” said Greg Basuk, CEO of AXS Investments. “We believe that volatility is going to be the investor’s statement for the balance of Q2, and honestly, you know, for the balance of 2022.”
On Wednesday, the Dow fell more than 1,100 points, marking the worst sell-off in nearly two years. The S&P 500 also suffered its worst one-day fall since June 2020, losing about 4%, and the Nasdaq composite fell 4.7%.
These losses were partly driven by Target and Walmart’s quarterly reports that weighed on the results of the warmest inflation in decades by controlling higher fuel costs and consumer demand. Despite a 24% drop on Wednesday, the target shares were again 2% lower on Thursday.
“The sharp sell-off of this company (as well as other products / consumer companies) this quarter shows that inflationary pressures are ultimately affecting earnings,” said Manesh S. Deshpande, head of US equity strategy at Barclays. Thursday note. “Even if inflation rises for a good part of a year, [S&P 500] Margins and forward earnings remain resilient, which is no longer the case. “
Cisco was the latest major company to sink, with Tech Belvederes down 13% on Thursday. Cisco said hours later on Wednesday that quarterly revenue fell short of analysts’ expectations and warned that revenue for the current quarter would be disappointing.
Nevertheless, a rebound in tech stocks boosted the Nasdaq Composite. Shares of Synopsys rose 12% in trading on Thursday after the software company posted an earnings beat. Cloud company Datadog’s shares jumped 12%.
Stocks are under pressure throughout the year as investors first move away from high-value technology stocks with low returns. But the sell-off has spread to more sectors of the economy, including banks and retail, as growing fears of a recession scare investors.
“It simply came to our notice then. On Wednesday, “they came in the name of consumers, but they are still selling at a slower growth rate. In other words, money is flowing in cash instead of in different sectors.”
“Although it will not be a straight line, [this] This confirms that selling a rally in the bear market is much easier than buying a dip, ”Krinski said.
Several Wall Street strategists have issued some alarming predictions for stocks if the Fed rate pushes the economy into recession. GDP fell 1.4% in the first quarter, so some slowdown is already visible.
Deutsche Bank cut its official target for the S&P 500 overnight, but said the recession would bring even greater losses.
“If we go into recession very quickly, we see market sales going better than average, that is, above the historical range and given a higher initial overvaluation, -35% to -40% or S&P 500 3000,” said Deutsche Bank’s Chief Global Strategist. Binky Chadda wrote in a note 6
During a Wall Street Journal conference earlier this week, Federal Reserve Chairman Jerome Powell reiterated his remarks that “there will be no hesitation” in reducing inflation.
Meanwhile, U.S. weekly unemployment claims rose to 218,000 in the week ended May 14, the Labor Department said Thursday, citing recent indications that economic growth is slowing.
The Dow is down for seven consecutive weeks and down 14% in 2022. Nasdaq is down 27% this year. The S&P 500 lost 18%.