The S&P 500 closed in a 'bear market' on Monday. What does that mean?
Stocks fell into a so-called bear market on Monday, after an intense sell-off that saw the S&P 500 Index shed 3.9% and fall to its lowest level since March 2021.
But just what is a «bear market»?
The term is used by investors to describe a steep and sustained market downturn. Technically, it's a drop of 20% or more from recent highs.
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Investors commonly apply the phrase to a broad stock index like the S&P 500 or Dow Jones Industrial Average, but it also works for individual stocks.
The S&P 500 was down more than 21% from its January record when the market closed Monday — the first time since March 2020 that the U.S. stock index closed in bear market territory.
Wall Street is currently spooked by many factors, including high inflation, rising interest rates, war in Ukraine and worries about recession.
Fears are growing that the Federal Reserve may have to be more aggressive to cool inflation than initially expected. To that point, Fed policymakers are entertaining the idea of a 75-basis-point rate increase this week.
There isn't anything particularly special about the 20% demarcation line used to define a bear market. It's more a symbolic psychological hurdle for investors. It often portends — but doesn't cause — a recession.
«It's a shortcut in language around the financial markets that people use,» Charlie Fitzgerald III, an Orlando, Florida-based certified financial planner, said of bear markets. «The bottom line is, it's a tough time.»
By comparison, a «bull market» is a period when stocks are surging, which
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