S&P 500 Back In Bear Market Territory
NAGA | Jun 29, 2022 09:46AM ET
The S&P 500 continues to remain under pressure with the price of oil increasing and Consumer Confidence reaching a 17-month low. Yesterday, the S&P 500 declined by 2.05%, the Dow Jones Industrial Average lost 1.56%, and the NASDAQ 3.09%. This price action looks very different from the previous week when we saw the stock market correct upwards, and, according to economists, this is mainly due to a strong “risk-off” market sentiment.
When looking at the price movement of the S&P 500, we can see that the price remains higher than the previous lows. S&P 500 futures are currently at the breakeven point as traders await to see whether the investors will keep selling once the market opens this afternoon. The price is currently lined up to form a lower high, but it is not yet sure if the downtrend will continue. So far, the price has corrected downward by 37% compared to the previous week’s increase.
Multiple factors within the market influence the price. One of the factors worrying traders is that the price of oil is rising again and has increased by almost 9% over the last four days alone. Rising oil prices can pressure inflation, fuel higher interest rates, and increases company expenses.
Another influencing factor is that the US Consumer Confidence Index has declined significantly, with the survey indicating that households are preparing for a recession. Many banks, including HSBC and JP Morgan, came out after the announcement advising that the market has “not yet fully priced in the recession.” This is yet another factor that’s got traders feeling anxious.
The “risk-off” appetite can also be seen in other investment categories, such as cryptocurrencies. The crypto market is specifically examined to determine the risk appetite of traders. Today, bitcoin declined 0.90% and 5.37% over the past five days.
Tesla (NASDAQ:TSLA) has also commented on the condition of the global economy. According to the company, they have dismissed 200 employees involved in the development of autopilot systems for Tesla cars. According to the company's CEO, the difficult global economic condition and uncertainty have forced them to make a 10% reduction in the number of employees.
The above news has also triggered speculation that the company will likely see a poorer performance in the latest quarter. Other big companies, such as Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), have reported similar news.
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The fact that the Chinese economy, one of the largest in the world, was under lockdown is also predicted to affect the performance of companies in general strongly, specifically Apple and Tesla, especially since Tesla was already forced to temporarily shut down its Shanghai factory leading to a reduction in car production.
It should also be noted that the market is likely to be influenced by the upcoming earning season, which is officially starting next week. The performance of companies over the past quarter is likely to affect investors’ appetite strongly. In addition, the earnings reports may provide further insight into the likelihood of a recession.
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