mcloudyn.png
Friday August 19th, 2022 5:04AM

Wall Street enters a bear market as the S&P 500 dives 3.9%

By The Associated Press
Related Articles
  Contact Editor

NEW YORK (AP) — Wall Street entered a bear market Monday as the S&P 500 sank 3.9%, bringing it more than 20% below the record high it set in January. Fears about a fragile economy and stubbornly high inflation have slammed the stock market in recent days and sent Treasury yields surging to their highest levels in years. A report last week that inflation was getting worse, not better as many had hoped, sent a chill through markets that carried over into this week. Investors expect the Federal Reserve will get more aggressive to get inflation under control, even if it risks a recession.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

NEW YORK (AP) — Fears about a fragile economy are forcing Wall Street toward what's known as a bear market, with the S&P 500 tumbling more than 20% below its record set early this year.

The index dropped 3.3% in the first chance for investors to trade after getting the weekend to reflect on the stunning news that inflation is getting worse, not better. The Dow Jones Industrial Average was down 741 points, or 2.4%, at 30,651 as of 3:05 p.m. Eastern time, and the Nasdaq composite was 4% lower.

The center of Wall Street’s focus was again on the Federal Reserve, which is scrambling to get inflation under control. Its main method is to raise interest rates in order to slow the economy, a blunt tool that risks a recession if used too aggressively.

With the Fed seemingly pinned into having to get more aggressive, prices fell for everything from bonds to bitcoin, from New York to New Zealand. The sharpest drops hit what had been big winners of the easier low-rate era, such as high-growth technology stocks and other former darlings of investors. Tesla slumped 6.8%, and Amazon dropped 4.9%. GameStop tumbled 8.3%.

“The best thing people can do is to not panic and don’t sell at the bottom,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, "and we’re probably not at the bottom.”

Some economists are speculating the Fed on Wednesday may raise its key rate by three-quarters of a percentage point. That’s triple the usual amount and something the Fed hasn’t done since 1994. Traders now see a 28% probability of such a mega-hike, up from just 3% a week ago, according to CME Group.

No one thinks the Fed will stop there, with markets bracing for a continued series of bigger-than-usual hikes. Those would come on top of some discouraging signals about the economy and corporate profits, including a record-low preliminary reading on consumer sentiment soured by high gasoline prices.

The economy is still holding up overall, but the danger is that the job market and other factors are so hot that they will feed into higher inflation. That’s why the Fed is in the midst of a whiplash pivot away from the record-low interest rates it engineered earlier in the pandemic, which propped up stocks and other investments amid hopes of juicing the economy.

Wall Street's sobering realization that inflation is accelerating, not peaking, is also sending U.S. bond yields to their highest levels in more than a decade. The two-year Treasury yield shot to 3.27% from 3.06% late Friday after touching its highest level since 2007, according to Tradeweb.

The 10-year yield jumped to 3.37% from 3.15%, and the higher level will make mortgages and many other kinds of loans more expensive. It touched its highest level since 2011.

The higher yields mean prices are tumbling for bonds, a relatively rare occurrence for them in recent decades. They're also a particularly painful hit for older and more conservative investors who depend on them as the safer parts of their nest eggs.

The gap between the two-year and 10-year yields has also narrowed, a signal of weakening optimism about the economy. If the two-year yield tops the 10-year, some investors see it as a sign of a looming recession.

Monday's pain for markets was worldwide as investors braced for more aggressive moves from a coterie of central banks.

In Asia, indexes fell at least 3% in Seoul, Tokyo and Hong Kong as worries also rose about business-slowing, anti-COVID restrictions in China. In Europe, Germany’s DAX lost 2.4%.

Some of the biggest hits came for cryptocurrencies, which soared early in the pandemic as ultralow rates encouraged some investors to pile into the riskiest investments. Bitcoin tumbled more than 16% from a day earlier and dropped to $23,278, according to Coindesk. It’s back to where it was in late 2020 and down from a peak of $68,990 late last year.

On Wall Street, the S&P 500 was more than 21% below its record set early this year. If it finishes the day more than 20% below that high, it would enter what investors call a bear market.

Bears hibernate, so bears represent a market that’s retreating, said Sam Stovall, chief investment strategist at CFRA. In contrast, Wall Street’s nickname for a surging stock market is a bull market, because bulls charge, Stovall said.

The last bear market wasn’t long ago, but it was an unusually short one that lasted only about a month in early 2020. The S&P 500 got close to a bear market last month, but it didn't finish a day below the 20% threshold.

Michael Wilson, a strategist at Morgan Stanley who's been among Wall Street’s more pessimistic voices, is sticking with his view that the S&P 500 could fall further to 3,400 even if the U.S. economy avoids a recession over the next year.

That would mark another nearly 10% drop from the current level, and Wilson said it reflects his view that Wall Street's earnings forecasts are still too optimistic, among other things.

With soaring price tags souring sentiment for shoppers, even higher-income ones, Wilson said in a report that “the next shoe to drop is a discounting cycle" as companies try to clear out built-up inventories.

Such moves would cut into their profitability, and a stock's price moves up and down largely on two things: how much cash a company generates and how much an investor will pay for it.

___

AP Business Writers Damian J. Troise and Elaine Kurtenbach contributed.

  • Associated Categories: Associated Press (AP), AP National News, AP Online National News, Top General short headlines, AP Business, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Wall Street enters a bear market as the S&P 500 dives 3.9%
Wall Street entered a bear market Monday as the S&P 500 sank 3.9%, bringing it more than 20% below the record high it set in January
4:13PM ( 9 minutes ago )
Donaldson's 1-game ban upheld by MLB, fine cut to $5,000
Major League Baseball has upheld Josh Donaldson’s one-game suspension, a penalty that was assessed after the New York Yankees third baseman made a remark to White Sox star Tim Anderson about Jackie Robinson that Chicago manager Tony La Russa called racist
4:06PM ( 16 minutes ago )
Jan. 6 witness: Trump 'detached from reality' over election
Donald Trump’s closest campaign advisers, top government officials and even his family were systematically dismantling his false claims of 2020 election fraud ahead of the Jan. 6 attack on the Capitol
4:04PM ( 18 minutes ago )
Associated Press (AP)
Bear market growls on Wall Street as stocks and crypto dive
Fears about a fragile economy are forcing Wall Street toward what’s known as a bear market, with the S&P 500 tumbling more than 20% below its record set early this year
3:18PM ( 1 hour ago )
Search continues for missing men in Brazilian Amazon
The search for an Indigenous expert and a journalist who disappeared in a remote area of Brazil’s Amazon cis continuing following the discovery of a backpack, laptop and other personal belongings submerged in a river
3:12PM ( 1 hour ago )
Philip Baker Hall, of 'Hard Eight,' 'Seinfeld,' dies at 90
Philip Baker Hall, the prolific character actor of film and theater who starred in Paul Thomas Anderson’s early movies and who memorably hunted down a long-overdue library book in “Seinfeld,” has died
3:11PM ( 1 hour ago )
AP National News
Markets tumble worldwide, bear market growls on Wall Street
Fears about a possible recession are pounding markets worldwide on Monday, and Wall Street’s S&P 500 tumbled into the maw of what’s known as a bear market after sinking more than 20% below its record set early this year
1:59PM ( 2 hours ago )
The battle of Donbas could prove decisive in Ukraine war
Day after day, Russia is pounding the easterb Donbas region of Ukraine with relentless artillery and air raids, making slow but steady progress to seize the industrial heartland of its neighbor
1:44PM ( 2 hours ago )
Justices rule against detained immigrants seeking release
The Supreme Court has ruled against immigrants who are seeking their release from long periods of detention while they fight deportation orders
1:30PM ( 2 hours ago )
Top General short headlines
Crowds returned to Milan Furniture Fair after 2-year hiatus
Italy’s furniture and design industry sought to excite at the Milan Furniture Fair after a two-year pandemic delay
3:03PM ( 1 hour ago )
UK moves to rewrite Brexit rules; EU threatens legal action
Britain’s government has unveiled legislation that would unilaterally change post-Brexit trade rules for Northern Ireland
2:36PM ( 1 hour ago )
Will money-back guarantee win over wealthy donors?
The advocacy group Global Citizen and the finance firm NPX are engineering a new campaign that targets Forbes 400 billionaires, Giving Pledge members, and the wealthy generally — a group increasingly criticized for what is seen as tight purse strings
2:22PM ( 2 hours ago )
AP Business
UK to introduce law unilaterally changing post-Brexit rules
Britain’s government is expected to introduce legislation that would unilaterally change post-Brexit trade rules for Northern Ireland
11:24AM ( 4 hours ago )
Stock declines signal a bear market; here’s what that means
Wall Street is opening the week with more losses, and the S&P 500 has fallen to a level that market observers consider to be a bear market
10:00AM ( 6 hours ago )
Stocks slump on Wall Street, moving closer to a bear market
Stocks are opening sharply lower on Wall Street as inflation worries mount, pushing the S&P 500 closer to a bear market decline of 20% from the peak it reached early this year
9:45AM ( 6 hours ago )
AP Business - Economy
The AP Interview: Sri Lanka PM says he's open to Russian oil
Sri Lanka’s prime minister says he may be compelled to buy more oil from Russia as he hunts desperately for fuel to keep the country running
7:28AM ( 1 day ago )
Stocks dive to another losing week as inflation worsens
Wall Street’s shuddering realization that inflation got worse last month, not better as hoped, sent markets reeling on Friday
4:38PM ( 2 days ago )
Stocks sink after inflation comes in hotter than expected
Stocks sank on Wall Street Friday after investors' hopes were dashed that inflation might be peaking
4:14PM ( 3 days ago )
AP Business - Financial Markets
Vulnerable Dems run against Washington — and their party
Many of the nation’s most vulnerable Democrats are actively trying to distance themselves from Washington — and their party — as the midterm season enters its next phase
12:33AM ( 15 hours ago )
US: Pfizer COVID-19 shot appears effective for kids under 5
A review by federal health officials says that Pfizer's COVID-19 vaccine appears safe and effective for children under 5, the only group not currently eligible for vaccination
9:45PM ( 18 hours ago )
US: Pfizer COVID-19 appears effective for kids under 5
A review by federal health officials says that Pfizer's COVID-19 vaccine appears safe and effective for children under 5, the only group not currently eligible for vaccination
7:35PM ( 20 hours ago )
AP Business - Industries
US inflation at new 40-year high as price increases spread
The prices of gas, food and most other goods and services jumped in May, raising inflation to a new four-decade high and giving American households no respite from rising costs
5:36PM ( 2 days ago )
US inflation hit a new 40-year high last month of 8.6%
The prices of gas, food and most other goods and services jumped in May, raising inflation to a new four-decade high and giving American households no respite from rising costs
10:57AM ( 3 days ago )
World shares slip after rate jitters pull Wall Street lower
Shares are mostly lower in Europe and Asia ahead of the release of key U.S. consumer inflation data
5:23AM ( 3 days ago )
AP Business - Financial Services
Donaldson's 1-game ban upheld by MLB, fine cut to $5,000
Major League Baseball has upheld Josh Donaldson’s one-game suspension, a penalty that was assessed after the New York Yankees third baseman made a remark to White Sox star Tim Anderson about Jackie Robinson that Chicago manager Tony La Russa called racist
4:06PM ( 17 minutes ago )
Jan. 6 witness: Trump 'detached from reality' over election
Donald Trump’s closest campaign advisers, top government officials and even his family were systematically dismantling his false claims of 2020 election fraud ahead of the Jan. 6 attack on the Capitol
4:04PM ( 18 minutes ago )
Phil Mickelson not giving up on playing PGA Tour
Phil Mickelson never had such a conservative strategy for the U.S. Open
4:00PM ( 23 minutes ago )
Takeaways: Trump's mind 'made up' on fraud ahead of Jan. 6
In its second day of June hearings, the House panel investigating the Jan. 6, 2021 insurrection is making the case that Trump and his advisers knew that his claims of fraud in the 2020 election were false
3:57PM ( 25 minutes ago )
Bucolic Ukraine forest is site of mass grave exhumation
Ukraine's national police chief says authorities are investigating the killings of more than 12,000 Ukrainians nationwide in the war since the Russian invasion in February
3:48PM ( 35 minutes ago )