A wild ride on Friday pushed U.S. stocks briefly into a bear market on Friday with the S&P 500′s decline from its all-time high in January reaching 20% at one point. A dramatic late-day reversal pushed the S&P 500 slightly into the green at the closing bell. The S&P 500 rose 57 cents on Friday after falling as much as 2.3% earlier in the session. At the day's lows, the S&P 500 was 20.9% below its intraday high in January. The index was last about 19.2% below its record. There's no official bear market designation on Wall Street. Some will count Friday's decline at the intraday lows as confirmation of a bear market, whereas some strategists may say it's not official until it closes 20% off its high. Regardless, it's the biggest downturn of this magnitude since the rapid bear market in March 2020 at the onset of the pandemic.
The Dow Jones Industrial Average closed up 8 points being down more than 600 points at the day's lows. The Nasdaq Composite dipped 33 points or 0.3% falling further into bear market territory, trading 30% off its highs.
For the week, the Dow is off by 4% for what would be its first 8-week losing streak since 1923. The S&P 500 is down 5% for the week, while the Nasdaq is off by 6%. Both indexes are on pace to fall for a seventh-straight week.
The S&P 500′s tumble into a bear market comes as the U.S. has been dealing with inflationary pressures not seen in decades. Those have been worsened by a surge in energy prices — which was exacerbated in large part by the start of the Ukraine-Russia war.
The jump in inflation then led the Federal Reserve to hike rates in March for the first time in more than three years. Earlier this month, the central bank got even more aggressive and hiked rates by half a percentage point.
At first, the sell-off losses were centered around highly valued growth and technology stocks. However, the drawdown eventually broadened to other parts of the market. Through midday Friday, energy was the only positive S&P 500 sector year to date.
Then this week, poor quarterly reports and outlooks from Walmart and Target raised concern over companies' abilities to deal with inflation and consumers' willingness to pay higher prices — putting even more pressure on the S&P 500.
The March 2020 bear market lasted just 33 days before the S&P 500 ended up rebounding to record highs again as investors bet on internet companies which thrived during the pandemic.
Wall Street continued dumping shares of semiconductor stocks Friday on recession fears and as Applied Materials lowered its guidance. Applied Materials, a manufacture of chip-making equipment, lost 4%. Shares of Nvidia and Advanced Micro Devices declined 3%.
Elsewhere, shares of Deere fell 14% after the heavy equipment maker reported a revenue miss. Shares of Caterpillar declined more than 4%. Industrials like Deere and Caterpillar are seen as barometers for the global economy.
The Fed has signaled it will continue to raise interest rates as it tries to temper the recent inflationary surge. Earlier in the week, Chair Jerome Powell said: "If that involves moving past broadly understood levels of neutral, we won't hesitate to do that."
That tough stance on monetary policy has stoked concern this week that the Fed's actions could tip the economy into a recession. On Thursday, Deutsche Bank said the S&P 500 could fall to 3,000 if there is an imminent recession. That's 23% below Thursday's close.
All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.