As S&P 500 confirms bear market, most of its components look worse

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As S&P 500 confirms bear market, most of its components look worse

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 As S&P 500 confirms bear market, most of its components look worse
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  • The S&P 500 dropped 3.5% on Monday while it admits to being in a bear market since the start of this year.
  • The market is jittery as investors feel the Fed Reserve’s aggressive interest rate hike could let off a recession.
  • In the technology sector, the S&P 5oo has seen almost 93% of the companies tumbling this year.

Wall Street's main indexes opened higher on Tuesday, a day after the S&P 500 confirmed it was in a bear market, as investors took relief from a smaller-than-expected rise in core producer prices.

The Dow Jones Industrial Average (.DJI) rose 75.60 points, or 0.25%, at the open to 30,592.34.

The S&P 500 (.SPX) opened higher by 13.89 points, or 0.37%, at 3,763.52, while the Nasdaq Composite (.IXIC) gained 88.20 points, or 0.82%, to 10,897.43 at the opening bell.

While the S&P 500 confirmed on Monday that it has been in a bear market since January, many of the benchmark's components are in far worse shape following months of fear-driven selling related to rising interest rates and worries about the economy.

The S&P 500's 3.9% drop on Monday was fueled by worries that more aggressive interest rate hikes by the Federal Reserve could push the economy into a recession. The S&P 500 has now tumbled about 22% since its Jan. 3 record high close, confirming it has been in a bear market since hitting that high.

Within the S&P 500, the picture is dire, with the median stock down 27% from its 52-week high, as of Monday's close. Over two-thirds of S&P 500 stocks were down more than 20% from their own 52-week highs as of Monday's close.

Within the S&P 500 technology sector index, 93% of stocks have fallen 20% or more from their highs, including PayPal Holdings, which has now tumbled 76% from its record high last July following a 7% drop on Monday.

Previously highly valued growth stocks have been badly punished in recent months by investors worried about the group's vulnerability to rising interest rates.

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Among stocks in the S&P 500 consumer discretionary index, more than 90% are in bear markets, including Etsy, down 77% from its record high, and Carnival Corp, down 67% from its high. The cruise ship company's stock slumped more than 10% on Monday.

Within the communication services sector index, Facebook-owner Meta Platforms has slumped 57% from its 2021 high, and Walt Disney Co has fallen 49%, including a drop of more than 3% on Monday.

With investors dumping streaming services as competition deepens, Netflix has been the S&P 500's worst performer in 2022, down 72% year to date.

Tesla, which last year soared to become one of Wall Street's most valuable companies has now tumbled 39% in 2022 after falling 7.1% on Monday.

While investors are laser-focused on the central bank's next interest rate announcement on Wednesday and on worries about a potential recession, the stock market's recent tumble has cooled valuations that in 2020 reached their highest level since the dot-com era. The S&P 500 is now priced at about 17 times expected earnings, which is in line with its average forward PE over the past 10 years, according to Refinitiv data.


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