Markets

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

Fri 06 May 22, 11:25am (AEST)
US 9 Wall Street
Source: iStock

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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

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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