Still a bear market: S&P 500 slump signals stocks never reached ‘escape velocity’

“It has been our opinion that the rally was a by-product of ultra-dry tinder (off-sides positioning, seasonality) ignited by the spark of improving financial conditions (contracting nominal yields, contracting BBB spreads and a weak dollar), but nothing that translated into escape velocity to the gravitational pull of the bear market,” deGraaf wrote.

See: Financial markets are flashing a warning that a recession is imminent: here’s what it means for stocks

Stocks fell sharply on Thursday, a day after the Federal Reserve delivered a half-point interest rate increase and indicated the fed-funds rate was likely to peak above 5% next year and remain there.

Half-point hikes by other central banks on Thursday, including the Bank of England and the European Central Bank, were seen driving home expectations for rates to remain elevated, particularly after ECB President Christine Lagarde emphasized that a series of half-point hikes remained a strong possibility in the effort to quash inflation.

See: Stocks end with sharp losses — blame it on Lagarde?

Stock-index futures pointed to another round of selling Friday. The S&P 500 dropped 2.5% on Thursday to close at 3,895.75, its lowest finish since Nov. 9. The S&P 500 closed at 3,577.03 on Oct. 12, its lowest finish since 2020, before bouncing as high as 4,080.11 on Nov. 30.

The S&P 500 remains down nearly 19% from its all-time high finish of 4,796.56 set on Jan. 3 and was down 18.3% for the year to date through Thursday’s close. The Dow Jones Industrial Average
DJIA,
-0.85%
has outperformed other major indexes, down 8.6% for the year to date.