Stocks have entered a bear market. Here’s what that means

It was another brutal day on Wall Street.

One of the broadest stock indexes, the S&P 500, entered a bear market during Friday’s session. That means it had fallen 20% from its recent high in January.

A bear market is considered an important barometer of investor pessimism and symbolizes a strong and sustained sell-off in the market. It is defined as a period in which a stock or market index falls 20% or more from a recent high.

The S&P 500 didn’t stay too long in bearish territory and rallied to end the day barely changed. However, the index was still down more than 3% for the week, posting its seventh straight week of decline, an event that has only happened five times since 1928, according to Howard Silverblatt, senior index analyst at S&P. Dow Jones Indices.

Stocks have been skewed in recent weeks and months on concerns about high inflation and rising rates. Fears that these forces could tip the country into a recession have also grown.

“We see a very narrow path to a soft landing and continue to anticipate a mild recession towards the end of 2023,” said Matthew Luzzetti, chief US economist at Deutsche Bank, in a recent note.

In addition to inflation, a series of uncertainties cloud the outlook for Wall Street. The ongoing war in Ukraine has driven commodity prices higher around the world, and fresh COVID lockdowns in China have raised fears that supply chain issues may continue.

Among the biggest losers in Friday’s stock market was Deere, which is one of the world’s largest tractor manufacturers. The company said it was paying more for materials and continued to face a shortage of parts. Deere shares fell 15%.

It comes after earlier this week Walmart and Target reported they were seeing signs of their customers changing their shopping habits. Some bought fewer items and others stayed away from more expensive items.

Walmart CFO Brett Biggs even said CNBC that customers were switching to cheaper brands and choosing smaller sizes like half gallons of milk and the lunch meat shop brand instead of a more expensive brand.

The S&P 500 is an index that tracks the 500 stocks of most of America’s largest companies. It is a barometer of the health of American businesses and is considered one of the main indicators of the American economy.

Trillions of dollars, including retirement portfolios, are invested in the index funds that make up the stocks of the S&P 500. When the value of the index drops, less is left for retirement income, one of the main causes of concern for retirees.

On Friday, the benchmark S&P joined the tech-heavy Nasdaq, which is already in a bear market and is now down about 30% from its all-time high. The Dow Jones Industrial Average is down about 15% from a recent high.

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