Stocks extended their decline Monday with the Dow Jones Industrial Averages officially becoming the last major indexes to enter a bear market, the latest milestone in 2022 turmoil as the market deepened its slump amid growing fears of a recession
The S&P 500 fell 38.19 points, or 1%, to 3,655.04, to close at a new 2022 low. The Nasdaq Composite fell 65 points, or 0.6%, to end at 10,802.92. The Dow Jones ended the day with a decline of 330 points or 1.1% to close at 29,260.81, marking its fifth down trading day in a row. The losses have put the blue-chip index now 20.5% from its January 4th record peak of 36,799.25 to become the last of three major indices that entered its first bear market of 2022. A bear market is defined by a drop of 20% or more from its recent record peak.
The Dow averted a fall into a bear market last Friday when it briefly entered the bear territory at one point during the session when the blue-chip tanked from a 700-point drop before bouncing off to close 486 points lower. However, the Dow slide marked its new 2022 low for its lowest level since November 20, 2020.
The Dow, consisting of 30 large-cap companies is considered a much smaller index than the two other indices and is historically the most closely watched by Main Street.
Monday marked the 182nd trading day since the Dow’s January 4 peak. According to Dow Jones Market Data, the past bear market has taken at least 133 trading days or a median of 114 days to fall from their peak high before falling to enter a bear market status. The Dow last fell into a bear market during the early onset of the COVID pandemic on March 11, 2020, when it dropped 37.1% from its February 12 peak. It exited the bear market on March 26, 2020, just after 19 trading sessions and breaking the record of the shortest time of retreating from status.
Both the S&P 500 and Nasdaq already confirmed their entry into a bear market earlier this year, with the S&P 500 notching that grim milestone status back on June 13 when falling more than 20% from its January 3 record. The S&P 500 is down 23% after the benchmark on Monday ended to take out its previous 2022 closing low set on June 16 to hit its new 2-year lowest close since December 14, 2020. Meanwhile, the tech-heavy Nasdaq, which entered a bear market in March, is down by a punishing 32% from its recent high set on November 19, 2021.
Stocks have been weighed down by concerns about stubbornly hot inflation with the Federal Reserve’s raising their aggressive stance pressure with additional interest rate hikes in hopes to try to cool high prices on everything from food to clothing. Last Wednesday, the Fed offered up another supersize rate increase of 75 basis points, its third consecutive interest-rate rise of 0.75 percentage points that lifted its benchmark rate to a range of 3% to 3.25% after being virtually zero at the start of 2022. The Fed also released its Dot Plot forecast suggesting that its benchmark rate would be between 4 to 4.5% by the end of the year, a full point higher than Fed policymakers envisioned in their June FOMC meeting.
But such moves have investors on edge as higher interest rates hurt all kinds of investments and have weighed heavily on stocks. Many analysts have begun to cut their forecasts for upcoming earnings over concerns about higher rates will lead to economic growth slowing demand and that the Fed’s aggressive move will veer the slowing economy into a deeper recession.
With only a few days left in September, stocks are heading for another losing month as markets fear that the higher interest rates being used to fight inflation could knock the economy into a recession.
Bear MarketDow JonesFederal ReserveInterest RatesNasdaq CompositeRecessionS&P 500Stock Market
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