NEW YORK, (Reuters) – Wall Street’s major stock indexes fell on Friday. The benchmark is on course to record a drop of over 20% from Jan. 3’s closing high. This common metric can be used to identify a bear market.

The stock market has been in turmoil since the beginning of the year. Investors are selling stocks to avoid worries about whether the Federal Reserve can tame the inflation without starting a recession.

STORY:

MARKET REACTION: STOCKS: Dow down 1.35%, S&P 500 down 1.62%, Nasdaq down 2.23%

COMMENTS:

PAUL NOLTE, PORTFOLIO MANAGER, KINGSVIEW INVESTMENT MANAGEMENT, CHICAGO

    “If we don’t today it’ll be Monday. There has been very little bounce in all the recent trading. Every bounce that we have had is gone quickly. Today, and possibly next week, we will be in a bearish market. It is much more predictable than any other thing. This is a known fact, especially after what has happened with small caps and Nasdaq. It’s not a surprise that the S&P finally gets there.

    “I don’t think investors sell because we’re now in a bear market. They have been selling since the beginning. It is now up to the Fed what they do. They’ve always come to the rescue of the markets. It’s not clear where Powell placed his money this time, or even if there was one. They have raised interest rates twice but we’ve not seen an impact on the economy other than housing.

RANDY FREDERICK – VICE PRESIDENT TRADING AND DERIVATIVES CHARLES SCHWAB AUSTIN TEXAS

“It does look like we are finally going to actually hit a bear market on the S&P 500 which to me is the final straw that says you are truly in a bear market, you have to close below 3,836, which we are below that level now. We could see one of the late-day rallies we get, but it might not.

“But the one thing that doesn’t really seem to line up as far as the washout goes, or the capitulation, is just with the . Thirty-two is not a low VIX, historically it is high, but it is not at all in line with what you oftentimes see when everybody throws in the towel, I am selling indiscriminately, I’m fed up, I am just trying to save what I got left kind of thinking. We just haven’t seen that.”

The rule of thumb is that you need to have at least 40 percent. Sometimes it goes even further. You can see that the COVID bear markets in 2020 hit around eighty. It’s nothing close. Although I think that there will be a bearish market today, or even next week, it is likely that this happens. But, that doesn’t mean that I doubt we have hit the bottom.

It isn’t necessary that you have one of these days, but it often happens. We could simply continue in a slow and steady downtrend, which, frankly, has been our trend since January 2. While that doesn’t hurt as much all at once, it is like pulling the band-aid off slowly, it is going to be long and slow and painful and frankly could go on for several more months so I just don’t know. However, without the big volatility jump and capitulation feeling, I hesitate to say that we have reached bottom.

Americas Economics and Markets Desk, +1-646 23-6300