S&P 500 enters the bear market as inflation strengthens grip on businesses and consumers

Shares fell in the early afternoon trading on Friday, with the S&P 500 entering the bear market territory. The index has fallen more than 20% from its peak in January, as it remains firmly on course for its seventh straight weekly decline.

The S&P fell 69 points, or 1.8%, to 3,832 from 1:40 a.m. EST, while the Dow Jones Industrial Average fell 587 points, or 1.9%, to 30,667 and the Nasdaq fell more than 3.0%.

All three indices are focused on drops of 4% or more for the week, to a massive pullback two days ago,

The stock market remains stuck in a downturn amid worries about how inflation squeeze businesses and consumersInvestors are also worried about the Federal Reserve’s plan to aggressively raise interest rates and whether that will help temper the impact of inflation or shrink growth too much, and send the economy into a recession,

“This has been a particularly worrying retreat, combining all the things you really do not want to see,” said Brad McMillan, chief investment officer for the Commonwealth Financial Network, in a research note. “It has been the biggest retreat since the beginning of the pandemic.”

He added, “But the depth, speed and duration all combine to suggest that as long as the foundations are sound (as they are), we’re likely to get close to the bottom.”

The market praises the Fed’s chances of aggressively raising interest rates later this year, as well as a cooling economy, said Vital Knowledge Media analyst Adam Crisafulli in a research note. The job market is also booming, as some companies are scaling back on hiring plans. However, other economic measures remain strong, he added.

Consumer spending “holds up well,” said Crisafulli, who sees the current downward trajectory of the market in part as a natural response to recent Fed action.

Meanwhile, some sectors enjoyed Friday gains, such as health care and technology stocks. Pfizer went 3.6% and Apple went 1%. The tech sector has been particularly tough and has sustained many of the big swings in the market throughout the week.

Bond proceeds edged army. Yields on the 10-year treasury fell to 2.83% from 2.85% late Thursday.

China’s surprise rate cut

Concerns about inflation have become increasingly serious Russia’s invasion of Ukraine pushing energy and some major food commodity prices higher. China, the second largest economy in the world, received a renewed hit from lockdowns in major cities due to COVID-19 cases, but a surprising cut in interest rates by the Chinese government has at least temporarily reduced some fears.


Markets fell precipitously after poor earnings reports from Target and Walmart

02:02

Wall Street has been processing retailer revenue this week. The sector is a key focus as investors try to measure how much damage inflation inflicts on business activities and whether higher prices on everything from food to clothing encourage consumers to sharpen their spending.

Industry bellwethers Walmart and Target both reported disappointing revenue this week, saying higher costs for food, fuel and transportation reduced their profit margins. Both have lowered their expectations for the year. In another sign that consumers are withdrawing, Amazon is reporting them first four-year loss in seven years.

Discount retailer Ross Stores fell 22.2% on Friday after cutting its earnings forecast and citing rising inflation as a factor.

But the consumer is not as weak as [Target] of [Walmart] would suggest, “said Crisafulli, who warns against perceptions” clouded by a chorus of negativity. “

If investors can “stop looking at daily gears, there’s a lot to encourage,” he said, “specifically the reopening of China, the peak of US inflation / Fed hawkishness, and the downturn. of multiples of shares. ”

Several shopkeepers were rewarded for encouraging results. Ugg shoemaker Deckers Outdoor went 18.6% and Foot Locker went 5% after beating analysts’ revenue forecasts.

Investors continue to watch the Fed for hints of more interest rate hikes to cool inflation running at a four decades high, Fed Chairman Jerome Powell said this week that the US Federal Reserve can take more aggressive action if price pressures do not ease. A major concern is that the Federal Reserve will increase interest rates too high and too fast, polluting economic growth.


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