The S&P 500 closed below its 50-day moving average for the first time since March, indicating potential further losses for the index. The recent stock-market selloff that began in late July has been attributed to various factors including rising long-dated Treasury yields and weaker-than-expected corporate earnings. The break below the 50-day moving average, along with other technical signals, has raised concerns among analysts about the near-term performance of stocks. Market technicians have noted the deterioration of several medium-term momentum gauges since August, suggesting a corrective phase that could last weeks. Additionally, historical seasonal trends indicate that September is historically the worst month for S&P 500 performance, further adding to the cautious outlook. Despite this, analysts believe that the long-term trend remains solid and view the current pullback as an opportunity for investors to buy stocks at more attractive valuations later in the year. However, rising Treasury yields are causing some nervousness on Wall Street, with the yield on the 10-year Treasury reaching its highest level in about 10 months. If yields continue to climb, it could potentially trigger a larger and more forceful selloff in stocks.
S&P 500 Closes Below 50-Day Moving Average, Signaling Potential Losses
The S&P 500 closed below its 50-day moving average on Tuesday, a significant technical signal that could indicate more losses for the index. This is the first time since March that the index has fallen below this closely watched momentum gauge. The 50-day moving average is a key indicator of market trends and its breach suggests a potential continuation of the recent stock-market selloff.
Stocks have been on a downward trend since late July, with analysts attributing the decline to various factors such as rising long-dated Treasury yields and a stronger U.S. dollar. Additionally, despite beating Wall Street forecasts, the largest U.S. companies have failed to meet market expectations for corporate earnings in the second quarter.
The break below the 50-day moving average follows a two-week losing streak for the S&P 500, which experienced its largest decline since March. The Nasdaq 100, the best-performing major U.S. equity index this year, also suffered back-to-back weekly losses for the first time since December.
Analysts are predicting further losses for stocks in the near term. Several medium-term momentum gauges have deteriorated in August as stocks continue to decline. Market technician Katie Stockton believes that this corrective phase could last for weeks, although not necessarily months. Historical seasonal trends also pose a concern, as September has historically been the worst month for S&P 500 performance.
Despite these indicators, analysts suggest that the S&P 500 still has room to fall before raising concerns about the bull-market run ending. The next meaningful support level for the index is around 4,325, followed by 4,200 and 4,100. However, analysts view the current pullback as an opportunity for investors to buy stocks at more attractive valuations later in the year.
Rising Treasury yields are causing some unease on Wall Street. If long-dated yields continue to climb, it could lead to a larger and more forceful selloff in stocks. The yield on the 10-year Treasury reached its highest level in about 10 months on Tuesday, and analysts are keeping an eye on the 4.333% mark, which corresponds to the more than 15-year highs for the 10-year yield reached in October.
In conclusion, the S&P 500 closing below its 50-day moving average signals potential losses for the index. The ongoing stock-market selloff, driven by factors such as rising Treasury yields and disappointing corporate earnings, could continue in the near term. However, analysts believe that the market still has room to fall before reaching fresh lows. Investors may see this as an opportunity to buy stocks at more favorable prices later in the year, especially if the market corrects and removes some of the excesses. Rising Treasury yields remain a concern, and further increases could lead to a more significant selloff in stocks.
Short Takeaways:
- The S&P 500 closed below its 50-day moving average, signaling potential losses for the index.
- Stocks have been sliding since late July due to rising Treasury yields and disappointing corporate earnings.
- Analysts predict further losses in the near term, with historical seasonal trends suggesting a challenging September for the S&P 500.
- The market still has room to fall before concerns arise about the bull-market run ending.
- Rising Treasury yields could lead to a larger selloff in stocks, and the level to watch is 4.333% for the 10-year yield.
