S&P 500 Cuts Losses After Briefly Entering Bear Market

© Reuters

By Yasin Ebrahim

AiVIF.com -- The S&P 500 cut losses after briefly entering bear-market territory intraday Friday, as investors weighed up ongoing worries about an inflation-led dent to growth and fresh support from China to support its economy.

The S&P 500 cut its loss to trade about 0.30%. The Dow Jones Industrial Average slipped 0.2%, or 49 points, the Nasdaq fell 0.74%

Real estate, health care and energy helped the broader market recovery, with latter underpinned by a climb in oil prices.

Consumer discretionary had earlier led the sea of red on Wall Street after quarterly results from corporates continue to flag the impact of inflation just as the Federal Reserve shows little sign of slowing down rate hikes.

St. Louis Fed President James Bullard said Friday that raising rates by 50 basis points at upcoming meetings was a good plan, and stressed that higher interest rates would be needed to keep inflation under control.

Ross Stores (NASDAQ:ROST) plunged more than 22% after first-quarter results fell short of Wall Street estimates, and the off-price retailer cut its guidance amid pressure from higher transportation and labor costs.

The weaker results come as the other retailers including Walmart (NYSE:WMT) and Target (NYSE:TGT) reported results earlier this week also stoked worries about the impact of inflation.

Deere (NYSE:DE), meanwhile, reported quarterly results that missed on the top line, and highlighted the impact of inflation and supply chain issues ahead, sending its shares more than 14% lower.

Foot Locker Inc (NYSE:FL) bucked the trend, rising more than 4% after the footwear retailer reported better-than-expected profit that helped overshadow softer revenue and same-store sales.

The ongoing worries about inflation offset early-day optimism after China’s move to cut a key lending benchmark to support its economy, which has been impacted by recent lockdown measures in Shanghai and elsewhere, eased fears about slowing global growth.

“Investors appear more optimistic this morning after a volatile week as China takes its latest step to bolster the country’s economy,” Stifel said in a note earlier on Friday.

Technology was off its lowest levels of the day, though Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL) continued to weigh on big tech. 

The broader market's recent losses, which puts it on track for seventh straight weekly slump has some speculating whether a bottom will soon be reached. But experts suggest there is still more pain ahead as investor capitulation has reached the levels of prior market downturns.

"We have been encouraged by the breadth and manic selling activity occurring a few days throughout the recent correction cycle, however, we are not yet seeing comparable ‘capitulation metrics’ relative to the 2018 or 2020 market downturns," Janney Montgomery Scott said in a note.

"This suggests to us that even though we are in (or close) to a bottom range, we may have to experience more volatility before the markets are more thoroughly washed out," it added.