Wall Street Slide Continues, With S&P 500 Edging Closer to Bear Market

The drop has left the SP 500 on the edge of a bear market, Wall Street’s term for a drop of 20 percent or more from its last peak, a label meant to highlight just how dark the mood among investors has become. Through Thursday, the index was down about 18 percent from its Jan. 3 peak. The Nasdaq Composite is well into bear market territory, down 29 percent from its November high.

The drop this week has come along with fresh updates on the pace of inflation in the United States. The Consumer Price Index rose 8.3 percent in the year through April from a year earlier, the government said on Wednesday, while a measure of prices paid to producers rose 11 percent. While both measures showed that inflation cooled slightly from the month before, they remain uncomfortably high.

For stock investors, the inflation data feeds directly into views on how aggressively the Federal Reserve will raise interest rates: Higher borrowing costs will slow growth and also dampen interest in risky investments.

Analysts say the dour mood among stock investors isn’t likely to change until they get a handle on when the Fed, which raised its benchmark rate half a percentage point this month and is expected to do so again when it meets in June and July, will slow the rate increases. That won’t be clear until it’s certain that inflation has peaked.

“The Fed will want to see clearer evidence that inflation is cooling and higher interest rates are slowing demand before they start thinking about the endpoint of the current rate hike cycle,” Bill Adams, the chief economist for Comerica Bank, wrote in a note to clients on Thursday.

Article source: https://www.nytimes.com/2022/05/12/business/stocks-bear-market.html