NEW YORK (Reuters) - Wall Street's main stock indexes slumped on Friday, with the benchmark S&P 500 on track to confirm a decline of more than 20% or more from its Jan. 3 record closing high, a commonly used metric to determine a bear market.
Stocks have been under pressure since the start of the year as investors have dumped stocks amid worries over whether the Federal Reserve will be able to tame inflation without triggering a recession, with spillover effects from the war in Ukraine and the possibility of a slowdown in China from a rise in COVID-19 cases adding to the angst.
MARKET REACTION: STOCKS: Dow down 1.35%, S&P 500 down 1.62%, Nasdaq down 2.23%
PETER TUZ, PRESIDENT, CHASE INVESTMENT COUNSEL, CHARLOTTESVILLE, VIRGINIA
"Is it the last of it? What did Winston Churchill say about World War II? It’s probably the end of the beginning of the bear market, not the end of the bear market by itself."
“How long it lasts will depend on when inflation breaks. The bear market will break at the same time or maybe slightly ahead of that. We have some Fed rate hikes over the next couple of months to contend with, some inflation data too. Then things will turn around."
“What really flummoxed investors this week, myself included, is when you have the types of companies that typically do well in economic softness, do terribly, both as stocks and as companies. I'm thinking of Walmart and Target, and a few of the other companies of that ilk. These are the safe havens you run to in times of recession."
“If the consumer is feeling bad and makes up 70% of the economy, you just have to watch out for the next few quarters.”
TOM MARTIN, SENIOR PORTFOLIO MANAGER, GLOBALT INVESTMENTS, ATLANTA
“The most important time in the market is typically the last hour of trading. I'd rather say that if we continue to close down in that last hour, that probably doesn't bode well. But if we get a rally in the last hour with buyers stepping in, that does give some hope.”
“The market is cumulatively absorbing the information over the last week or so, particularly with the retail earnings that we've seen which has resulted in many of those stocks getting hammered."
“Certainly, the sentiment among consumers is pretty negative. And when you relate that to investor positioning in the market, there's been a fair amount of money with exposure to the markets that we'd like to have less and hedge funds are reducing their overall exposure. They are selling what they can, they're having to cover their shorts, but clearly, the selling of longs is overwhelming any short covering."
“So as people adjust to this, they are looking for where that bottom is, and, you know, the consensus seems to have been prior to today that we weren't there yet. Now, whether this takes us there, down to that market level of support that might be at least a temporary bottom before we could get some sort of balance is an open question. And, you know, people looking to things like the VIX which although up today is still below levels that have in the past been associated with market bottoms.”
“As bad as the markets are reacting, they haven't reacted to the extent on average that they've reacted to recessionary environments before. So there's more to go if we are indeed going to go into a recession and have an average market decline associated with that. A lot of that is going to depend on the actual path of inflation, and on what the Federal Reserve does, among other things like the war in Ukraine and the COVID policy in China etc. So there remains a high level of uncertainty. And you just don't know whether we've reached enough of a bottom that there'll be a counter trend rally.”
BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN
“We have to see if we close at these levels or not, but investors are clearly afraid of a recession. Corrections are driven by fears of inflation, recession, and geopolitics. We have the trifecta going on right now. Whether we stay at these levels or go lower depends on whether the fears become reality. The reports from major retailers increase the perceived odds of a recession being realized soon, but I’m not convinced that they’re bellwethers. A little more stimulus from China or maybe a more stable inflation print on Friday from the PCE price index could help provide a floor.”
KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH
"It's a watermark but it's relatively meaningless. Can it go lower? Yes of course."
"Hitting this mark, maintaining it and not going lower might give investors the confidence to buy."
"Investors are all about the worst case scenario ... so all these geopolitical things could push us lower. That being said today China rate cut gave us a positive open. It is something that, if you're a longer term investor, you need to pay attention to. This is because China's rate cut might make the Fed less aggressive out to concern for a too strong dollar."
"A higher interest rate environment calls for lower multiples. That's what we've been doing is decreasing the multiple on stocks ... if that pressure alleviates we could get back in the business of looking at businesses."
PAUL NOLTE, PORTFOLIO MANAGER, KINGSVIEW INVESTMENT MANAGEMENT, CHICAGO
"If we don't today it'll be Monday. In all of the trading that's gone on in the last couple of weeks, there really hasn't been much of a bounce. Any bounce we've had has gone away quickly. So we're going to be in a bear market today if not next week. It's more inevitable than it is anything else. It's a given, certainly with what's happened to Nasdaq and small caps. It's not a surprise that the S&P finally gets there.
"I don't think investors sell because we're now in a bear market. They've been selling all along. The question is still what does the Fed do. They have historically come to the market's rescue. We're not sure where the Powell put is this time around - or if there is one... Although they've raised rates twice, we really haven't seen any impact in the economy outside of housing."
RANDY FREDERICK, VICE PRESIDENT OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS
"It does look like we are finally going to actually hit a bear market on the S&P 500 which to me is the final straw that says you are truly in a bear market, you have to close below 3,836, which we are below that level now. Now we could get one of those late-day rallies like we sometimes get so it may not happen."
"But the one thing that doesn’t really seem to line up as far as the washout goes, or the capitulation, is just with the VIX. Thirty-two is not a low VIX, historically it is high, but it is not at all in line with what you oftentimes see when everybody throws in the towel, I am selling indiscriminately, I’m fed up, I am just trying to save what I got left kind of thinking. We just haven’t seen that."
"Generally, you are going to need to see something above forty and sometimes it is even way above that. If you go back to the COVID bear market in early 2020 it hit like eighty so it is nothing even close to that. I believe we are going to go into a bear market, whether that happens today or early next week I am not sure, but I am not convinced we are at the bottom yet simply because of that."
"Now it is not required you have one of those days but you oftentimes do, we could just simply go into a continued, slow, downtrend which frankly we have been in since the second day of this year. While that doesn’t hurt as much all at once, it is like pulling the band-aid off slowly, it is going to be long and slow and painful and frankly could go on for several more months so I just don’t know. But without that big, giant volatility spike and that capitulation-type feeling I am hesitant to make any predictions that we are at the bottom."
(Compiled by the Global Finance & Markets Breaking News team)