• The San Juan Daily Star

Wall Street poised to clinch bear market as S&P 500 tumbles

The benchmark S&P 500 was down more than 20% from its Jan. 3 record closing high on Monday, as investors sold stocks amid worries over whether the Federal Reserve will be able to tame inflation without triggering a recession.

A close of more than 20% below the record high would confirm the index was in a bear market, according to a commonly-used definition. It would be the first time the S&P 500 has confirmed a bear market since the 2020 Wall Street plunge brought on by the COVID-19 pandemic.

U.S. 10-year Treasury yields hit their highest level since 2011 on Monday and a key part of the yield curve inverted for the first time since April.

FOREX: The U.S. dollar index rose to a fresh four-week high.

“The VIX is up significantly. We maybe kissed 29 on Friday briefly, and it’s still pretty orderly and not terrible at 33, but it’s a big jump up for one day. There is that school of thought that believes we really won’t see capitulation until we hit 40 on the VIX. Now we’ve been higher (than today’s level) this spring, so on the positive side we might be getting a bit closer to capitulation. I’m not a huge technician, and my view is that we won’t really see a turnaround for the stock market until we see some kind of pivot from the Fed. And, by that I mean getting a little less aggressive, which I know is going to take time because right now the trajectory is get more aggressive. But I’m of the belief that we’ve already seen a significant tightening in financial conditions... and so it’s now a question of beat the clock.”

“This speaks to a market that is looking for Federal Reserve attention and policymaker attention and it is not getting it. That is why we are above 3.25%, I mean, three-and-one-third percent on the 10-year Treasury is a tremendous rate we are talking about now and the market has been selling off. We are seeing this year’s winners get beaten as well today so it speaks to me more of a market looking for attention from policymakers that it is not getting. And the Federal Reserve can’t because it is in its quiet period before Wednesday but also Federal government policy is not focused on this inflation pressure and how to we resolve it at this point and higher taxes generally aren’t going to help. This is a market looking for attention and a resolution and we may not get that until Wednesday.”

“The Fed could do more, that is what is actively being discussed, certainly what we are seeing in the market what is actively being discussed is do they do three-quarters of a point on Wednesday, do they talk about accelerating. How is the Federal Reserve going to get its arms around inflation and keep the economy going? There is just not enough answers. It could be the market is looking for more of a put but they are certainly pricing in an awful lot of rate hikes, they are pricing in a fairly aggressive Federal Reserve here.”

“It is interesting we have oil up on the day, so what had seemed like everyone is capitulating, everyone is rolling over, oil prices are going to fall and nope, oil prices have come back up.”

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