Stocks End Higher After Strong Comeback

A weekslong selloff took on new intensity Friday, sending the S&P 500 tumbling into bear market territory for the first time since the pandemic-driven selloff of 2020.

The session is even more disappointing because stocks got off to a positive start, helped by a belief that the market was due for a bounce from an oversold condition, by news that the People’s Bank of China cut its 5-year prime loan rate by 15 basis points to 4.45%, and by a strong showing in foreign equity markets.

The market, however, remains plagued by earnings growth concerns stemming from persisting inflation pressures and supply chain disruptions. The former issue was highlighted by Ross Stores (ROSS) and the latter was highlighted by Applied Materials (AMAT) and Deere (DE) following their earnings reports.

Presently, ten of the 11 S&P 500 sectors are trading lower, with consumer discretionary (-2.7%) getting hit the hardest amid continued weakness in the retail stocks in response to downside guidance from Ross. The SPDR S&P Retail ETF was down 5.1%.

The industrials (-2.5%), information technology (-2.4%), and communication services (-2.1%) sectors follow suit with losses over 2.0%, while the defensive-oriented real estate sector (+0.1%) is the only sector higher.

In addition, the mega-caps continue to exert heavy pressure on the market, even as the 10-yr Treasury note yield continues to move lower (currently down six basis points to 2.80%). Of course, Treasury prices are moving higher in part because of growth concerns and safe-haven positioning.

The Vanguard Mega Cap Growth ETF was down 2.6%, versus a 1.7% decline for the Invesco S&P 500 Equal Weight ETF (RSP). Amazon.com (AMZN), in particular, was removed from the Focus List at Citigroup.

Conversely, Palo Alto Networks (PANW) is a spot of green in a sea of red after the cybersecurity company topped earnings expectations and issued above-consensus fiscal Q4 guidance.

The CBOE Volatility Index remains above the 30.00 level, as the continued weakness in the broader market keeps hedging interest elevated.