“No Clear Trend What Happens Next”: Stocks Are Displaying Bearish Features Last Seen In 2022

By Tatiana Darie, Bloomberg markets live reporter and strategist

The stocks selloff is displaying features that were often seen back when shares plunged in 2022, which is a warning for equities now.

The S&P 500 has fallen for seven of the past 11 trading sessions through Monday, leaving its hit ratio — the amount of daily gains as percentage of total trading days — at 36.4%, on pace for its weakest since December 2022.

During the months when this ratio was similarly weak — say below 40% — over the past two years, stocks have seen average losses of 6.2%. Granted, most of it happened in 2022, when the Fed had just started hiking rates and recession fears dominated, so it may not be the most fair parallel. But it adds to other bearish signals, noted by Bloomberg’s Esha Dey here, indicating that the bullish momentum in stocks has turned.

The evidence is a bit mixed on what happens after April ends. Four of the past seven times since 2022 that the S&P 500’s hit ratio was equally low or lower saw stocks gain or hold unchanged in the following month as dip-buyers emerged. Yet in the remaining three times, stocks saw more heavy losses.

A lot will depend on corporate America’s showing this earnings season and where Treasury yields go from here. Tech giants like Microsoft, Meta Platforms and Amazon — among those projected to lead profit growth in the S&P 500 — are due to report next week and may offer a helping hand to stocks.

More immediately, though, the two-year yield is flirting with 5%, a level that’s proven scary for equities in the past (see “Morgan Stanley: 10-Year Yields Have “Decisively” Broken Through The Risk Level For Stocks“).