Why did Wall Street enter bear market territory and what this category means

Shares sold off on Monday, sending the S&P 500 down to a new low in 2022 and back into bear market territory.

Major stock indexes in New York on Monday deepened the losses of the last wheels, as a result of rising inflation in the United States and In this way, Wall Street entered the so-called “bear market”, that is, a bear market that experiences a prolonged decline in prices.

But, how low does a market have to go to be considered within a “bear market” territory? The US Securities and Exchange Commission (SEC) defines bear markets as a condition The broad market index drops 20% or more over a period of at least 60 days.

It should be noted that the financial markets move according to trends and this is what is most analyzed by investors, as it allows them to anticipate their direction. In this sense, a bear market or a “bear market”, as it is called in financial jargon, prices generally fall by 20% for at least two months.

Some notable examples of bear markets come from the stock market. Notable cases are the Great Depression (1929 crash), the 2008 financial crisis due to the collapse of the US housing bubble or the stock market crash of 2020 due to the coronavirus pandemic. These are the events that caused huge losses on Wall Street and affected stock prices across the board.

Wall Street, in a “bear market” mode

Stocks sold off on Monday, sending the S&P 500 index to a new low in 2022 and back into bear market territory as recession fears mount ahead of this week’s key Federal Reserve meeting. This week, today’s news portal highlighted NBC News.

The Dow Jones Industrial Average fell 810 points, or about 2.6 percent, the Standard & Poor’s fell 3.5 percent, and the Nasdaq Composite Index fell 4.35 percent.

Stockbrokers working on the New York Stock Exchange (USA), file photo EFE
Stockbrokers working on the New York Stock Exchange (USA), file photo EFE

The moves came as investors continued to digest a better-than-expected inflation report on Friday and braced for a Federal Reserve interest rate hike later in the week as the 10-year US Treasury yield saw its biggest jump since March 2020.

The S&P 500 hit a new intraday low of the year on Monday and its lowest since March 2021. The news portal noted that the benchmark index is down nearly 21% from its record high, and is back in bear market territory after trading briefly there during the day about three weeks ago.

A bear market or a “bear market”, as it is called in financial jargon, prices generally fall by 20% for at least two months

data from Bespoke Investment Group It turns out that since World War II There were 14 bear markets at the close, and on average, the S&P 500 was down an average of 30%, with the decline continuing with an average of 359 days.

Monday’s sell-off was broad, with only 10 of the S&P 500 components trading higher. The declines in the New York Stock Exchange also outperformed the highs 21-1.

These moves could signal that many investors are taking profits or repositioning their portfolios, and may indicate that markets are in a “capitulation phase,” said Jeff Kielburg, chief investment officer at Sanctuary Wealth.

Fears of an economic recession are growing in the United States

Shares of Boeing, Sales Force and American Express fell more than 9%, 6% and 4%, respectively, sending the Dow down, it was reported. NBC News. The portal highlighted that affected technology stocks were also affected. Netflix, Tesla and Nvidia fell more than 6% and the Nasdaq hit a new 52-week low and the lowest since November 2020.

He also mentioned that travel stocks were also down on Monday with Carnival and Norwegian Cruise Line down 11% and 12%, respectively. Delta Air Lines is down more than 7%, while United is down about 10%.

All major S&P 500 sectors slipped in the red, with energy and consumer goods down more than 4%.. Information technology, materials and communications services also declined by more than 3 percent. He also noted that as stocks were sold, short-term interest rates rose.

10-year Treasuries rose 20 basis points to 3.35 per cent as investors continued to bet that the Federal Reserve might be bolder to crush inflation. The two-year Treasury yield rose 23 basis points to 3.28% and earlier traded above its 10-year counterpart for the first time since April, a so-called yield curve inversion seen as an indicator of recession.

Monday’s moves came after the major averages last week posted their biggest weekly decline since late January.Investors are becoming increasingly concerned that rising inflation could push the economy into recession.

The Bureau of Labor Statistics reported Friday that the US consumer price index rose 8.6 percent from a year earlier last month, its fastest rise since December 1981. The gain exceeded economists’ expectations.

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Meanwhile, the bitcoin price fell below $24,000 on Monday and reached its lowest level since 2020 as risk-averse investors continued to dump the cryptocurrency as interest rates rose. NBC News.

Bitcoin reaches its lowest level since the end of 2020 (Photo: CriptoNoticias)
Bitcoin reaches its lowest level since the end of 2020 (Photo: CriptoNoticias)

Shares of news from crypto-related companies including Coinbase and Microstrategy are down 13% and 29%, respectively.

Cryptocurrency bitcoin has been a great indicator of investors’ risk appetite for stocks.JC O’Hara, chief market technician at MKM Partners. “A lot of the long positions that they bought last year are still pending so we can easily see a pullback to 19,500. This will be a bearish reading for stocks.

Meanwhile, investors are waiting for Wednesday, when the Federal Reserve is expected to announce a rate hike of at least half a percentage point. The US central bank has raised interest rates twice this year, including a 50 basis point increase in May in an effort to head off a recent spike in inflation.

In this sense, some economists believe that the Fed may raise interest rates by 0.75% this week after Friday’s US rate report.

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