3 things you need to know about the tumbling S&P 500 and Nasdaq

Fri 06 May 22, 11:25am (AEST)
A photograph taken at an off-kilter angle shows Wall St, New York, from a pedestrian's point of view
Source: iStock

Key Points

  • Simultaneously falling stocks and bonds are an ominous sign
  • The S&P 500 has failed to follow through and bounce on both up and down days in 2022
  • A bounce may not be a good thing as markets begin to roll over

You know we’re in for a rough session when the Nasdaq, Dow Jones and S&P 500 dip more than -3% overnight.

The risk-off attitude was exacerbated in cryptocurrency markets, which in my opinion, is a useful indicator for risk-assets. Bitcoin copped its biggest decline since January, down -8% to a near 4-month low of US$36,500.

In terms of the year-to-date performance of major indices: 

  • Nasdaq -22.2%

  • S&P 500 -13.5%

  • Dow Jones -9.8% 

  • ASX 200 -3%

The tech-heavy Nasdaq has deteriorated from a garden variety pullback in early January, to a correction by February and now the beginning of a bear market.

The ASX 200 has managed to outperform but mainly due to its defensive composition of three iron ore miners, five banks, Wesfarmers (ASX: WES), Telstra (ASX: TLS), and Woolworths (ASX: WOW).

SentimenTrader has provided some pretty interesting insights for how the S&P 500 is tracking this year. Let's take a look.

More pain ahead?

“There have been 2 days in the past 25 years when S&P 500 futures were down -3% and 10-year Treasury futures down -1%.”

  • October 9, 2008 

    • S&P 500 fell another -32% to bottom on March 9, 2009

  • March 18, 2020

    • S&P 500 fell another -8.6% to bottom on March 23, 2020

An unrewarding market

Another interesting set of numbers was how the S&P 500 was struggling to hold onto gains. In 2022: 

  • Average return after a down day -0.18%

  • Average return after an up day -0.16%

This is not a rewarding year for both dip buyers and rally chasers.

Bear market warning

The sudden bearish turn for markets has left many investors praying for a bounce.

Unfortunately, a bounce might not be something to cheer for as they've only been triggered during bear markets.

2022-05-06 10 57 02-FRx6O9ZX0AY31Nj (800×834)
Source: SentimenTrader


Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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