(Bloomberg) — In a sign of the severity of the market breakdown, the S&P 500 is trading below an important technical level for the longest period since the global financial crisis.
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The S&P 500’s long-term trend has turned “significantly lower recently,” and the index has closed below its 200-day moving average for 110 trading sessions, the longest streak since the bear markets of 2008-2009 and 2000-2002 , according to Custom Investment Group.
“Previous stretches of weakness since 2010 have only been corrections within longer-term trends, and the current decline appears to be turning into something more than that,” wrote strategists at the order in a note. Friday. “It will be hard to get too excited until the S&P moves back above the 200-day moving average.”
Stocks have been battered in recent weeks as investors try to make sense of what the Federal Reserve’s continued aggressive tightening means for an economy with a strong labor market and sticky inflation. A warmer-than-expected consumer price print, coupled with a warning from bellwether FedEx Corp., pushed the S&P 500 down nearly 5% for the week ended Sept. 16. three straight weeks — a stretch of volatility not seen since December 2018.
“You’re fighting seasonality — September is a weak month — you’ve got an aggressive Fed, you’ve got a weakened global macro outlook,” Victoria Greene, founding partner and chief investment officer at G Squared Private Wealth, said on Bloomberg TV. “So I think we’re going to retest the lows, if we don’t go down to 3,400.”
The S&P 500 maneuvered around 3,860 on Monday.
Traders are awaiting further cues from Fed Chairman Jerome Powell. Markets are betting the Federal Open Market Committee will raise rates by three-quarters of a percentage point on Wednesday and signal rates are above 4% before they are suspended. While a case can be made for going higher, a shocking rate increase of a full percentage point on Wednesday could add to the recessionary bits.
“There are a lot of really challenging things being thrown at the market,” John Porter, CIO and head of equity at Newton Investment Management, said in an interview. “I’ve been in this industry for over 25 years and I think the investment environment we’re in right now is one of the most complex or complicated environments I’ve seen in my entire career.”
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