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S&P 500 confirms bear market as recession worry grows

Published 06/13/2022, 05:42 AM
Updated 06/13/2022, 07:52 PM
© Reuters. A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., May 20, 2022. REUTERS/Andrew Kelly

© Reuters. A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., May 20, 2022. REUTERS/Andrew Kelly

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. equities tumbled on Monday, with the S&P 500 confirming it is in a bear market, as fears grow that the expected aggressive interest rate hikes by the Federal Reserve would push the economy into a recession.

The benchmark S&P index has fallen for four straight days, with the index now down more than 20% from its most recent record closing high to confirm a bear market began on Jan. 3, according to a commonly used definition.

All the major S&P sectors were sharply lower, with only about 10 components of the S&P 500 in positive territory on the day. Markets have been under pressure this year as climbing prices, including a jump in oil prices due in part to the war in Ukraine, have put the Fed on track to take strong actions to tighten its monetary policy, such as interest rate hike.

The Fed is scheduled to make its next policy announcement on Wednesday and investors will be highly focused on any clues for how aggressive the central bank intends to be in raising rates.

High-growth market heavyweights such as Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN) were the biggest drags on the S&P 500, as the yield on the benchmark 10-year U.S. Treasury note hit 3.44%, its highest level since April 2011. Growth stocks are more likely to see their earnings suffer in a rising rate environment.

A hotter-than-expected consumer price index (CPI) reading on Friday prompted traders to price in a total of 175 basis point (bps) in interest rate hikes by September.

Goldman Sachs (NYSE:GS) late on Monday said it expects 75-basis-point increases in June and July. Expectations for a 75 basis point hike at the June meeting jumped to 96% late on Monday from 30% earlier in the day, according to CME's Fedwatch Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?redirect=/trading/interest-rates/fed-funds.html.

"The market had been trying to rally around the idea that inflation has peaked, and the Fed would not have to be more aggressive," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.

"That story fell apart on Friday with the CPI report, showing broad inflation being entrenched everywhere you look."

According to preliminary data, the S&P 500 lost 149.91 points, or 3.85%, to end at 3,750.95 points, while the Nasdaq Composite lost 526.82 points, or 4.65%, to 10,813.20. The Dow Jones Industrial Average fell 857.70 points, or 2.73%, to 30,535.09.

Graphic: S&P 500 bear markets - https://fingfx.thomsonreuters.com/gfx/mkt/egpbkwzzyvq/Pasted%20image%201655136477182.png

In addition, the two-year 10-year U.S. Treasury yield curve briefly inverted for the first time since April, which many in the markets see as a reliable signal that a recession could come in the next year or two.

The Nasdaq Composite index, which suffered its fourth straight drop, confirmed it was in bear market territory on March 7 and has declined roughly 30% this year.

The CBOE Volatility index, also known as Wall Street's fear gauge, spiked to its highest level since May. Still, many analysts view the level as subdued and could mean more selling pressure is in store.

"This is a market that does not look like it is capitulating as much as it is frustrated," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle.

"Even with some of the securities being thrown out, it is just not deep enough, violent enough to see that people have taken positions off.

© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 13, 2022.  REUTERS/Brendan McDermid

Graphic: S&P 500 timeline - https://fingfx.thomsonreuters.com/gfx/mkt/xmvjoxzdbpr/Pasted%20image%201655126727434.png

Cryptocurrency- and blockchain-related stocks, including Riot Blockchain (NASDAQ:RIOT), Marathon Digital Holdings and Coinbase (NASDAQ:COIN) Global, all plunged as bitcoin slumped more than 10% after major U.S. cryptocurrency lending company Celsius Network froze withdrawals and transfers citing "extreme" conditions.

Latest comments

what a croc o baloney
the full impact of this crisis will be in election year 2024 including housing crash...i hope nancy is still alive so she can see what her "swamp" did to the country
Totally agree with you. Nancy is the most evil witch on earth
Incels hate accomplished women.
Looks Biden is incapable of managing a countrys economic
stupid stuffs: if people are expecting the prices to go higher, they can raise them by anticipation... then it should make the production of new good more profitable and the prices should then go down. Is this because of Biden? for this specific thing, no. There are only a limited amount of things that they can do...
I am more worried about our Beloved Biden. Biden must be feeling the shock of his life, thinking what have I done wrong. Redemption repentance are needed for the same. Then everything will be alright
It seems you know little of how economy works since you blame biden for the inflation. Maybe you have not read that there is a big war going on in europe where russia has invaded another country causing massive sanctions on russian energy both gas and old. This has caused prices at the pump to go balistic since we do not want to give money to putins warmachine
 big ukraine war ? lol in 80% of that country is no war...talking about sanctions ? how about amputating your own leg so putin gets a cold ?
Biden will soon enter the hall of Fame and beat George W approval rate of 19%
Nils buggar off you russian bot
Francois Hollande in France had an approval rate of 4%. He didn't resign. #democracy
Market collapse for sure
Sure.  But not much utility since you posted after collapse is well underway.
after midterms no more Dems in charge
Be very careful what you wish for.
nils is a russian who is only trying to split our nation in putins favour
Piss off russians bots
We'll all be poor if these liberal dem fools stay in power much longer!
If Putin-praising Trump were potus now, Putin would be done *******Ukrainians and gone onto *******people in the Baltics & Nordic & Poland & Moldova.
It's exactly the reason trump wanted to pull out of NATO. It had nothing to do with the cost. He wanted to give Putin a free hand to rampage eastern Europe without the US having to get involved as a NATO member.
Did Pieroni go to school? Is he still living in the cage?
The knife catchers arrive at 11AM with the predictability of the sunrise, and more losses are flagrantly maneuvered out of the system.  Just how do "investors" from around the world coordinate their "buying" to move the US Ponzi Scheme at such precise times during the day?  What's next, another miracle "in late trade?"  The biggest investment JOKE in the world gets more laughable by the hour.
The fear of recession is the best communication to slow down inflation. Maybe it's going to work...
"The link you provided showed that CA had the highest case totals and death count." --  No.  It shows death RATES.  How muddled is Carlos' brain?
blah blah blah I'm not worried I'm not selling anything I'm buying good companies at fair prices and eventually I'll be rewarded. Some I'm buying good companies at stupid prices I expect with 2x in 2 years so who cares if on paper I'm down 10,20,30,40% more I'll keep adding
didnt take 18 years, it bottomed out it 2 years. Lots of profit was made ffom 1932 onwards. Unless youre a buy high sell low type of guy.
Be patient...everything je gonna be ok😊
The 7 states with the highest Covid death rates are all Republican. Facts are not your enemy: https://www.statista.com/statistics/1109011/coronavirus-covid19-death-rates-us-by-state/
Florida and Texas, in fact, have much higher Covid death rates than California.
And Cal & NY are hosts to most international flights to/from U.S.
Asking for a link that's already been posted several times ... not bright.
Sale time!
Look at this as a buying opportunity. Buy in small lots. I believe this will go down more
Carlos:  The 7 states with the highest death rates from covid-19 are red states:  https://www.statista.com/statistics/1109011/coronavirus-covid19-death-rates-us-by-state/
dont sell ur holding or not made fool
only 25 bps will hike on June or may not hike also only making investor foolish
only trapping money of people
cash is trash too?
UURAAAAAA😀
How can I do this
Let's Go Brandon!!! Let's Go Nancy!!! Let's Go Chuckie!! The trifecta of world peace and harmony!!
Lmao what a du*mb statement. Are you totally blind to what your saviors are doing to you and this country??
 They are doing better than if Trump had won 2nd term.  "Donald Trump has no idea why he wants a 2nd term":  https://www.cnn.com/2020/07/03/politics/donald-trump-2nd-term-2020/index.html .  And after he lost, Trump was asked many times what he would do differently from Biden and his ideas are to reveal US submarine locations, threaten nuclear Armageddon like Putin does, and frame China for US attacks: https://www.vanityfair.com/news/2022/03/donald-trump-russia-nuclear-submarines
... you believe the garbage from CNN?? and Vanity? Seriously? my God man. wake up.
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