S&P 500 confirms bear market as recession worry grows

S&P 500 confirms bear market as recession worry grows

Traders work on the floor of the NYSE in New YorkChuck Mikolajczak

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, Microsoft Corp and Amazon.com Inc 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 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…..Story continues

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