The S&P 500 falls into the territory of the bear market; Sales in the stock market continue

It has been several decades since stocks have fallen in such a long period. Dow Industrials is heading for its eighth weekly loss in a row, their longest such series since 1932, near the height of the Great Depression. The S&P 500 and Nasdaq are heading for their longest series of weekly losses since 2001[ads1], after the dot-com bubble burst.

The driving force behind the sale, investors say, is growing fears for the health of the United States and the global economy. Money managers spent the first months of the year worried that Federal Reserve rate hikes would take a heavy toll on expensive stocks that had driven the market’s remarkable rise in recent years. Investors fled technology stocks and pulled billions of dollars out of Nasdaq-tracking funds. Higher interest rates tend to dull the lid on companies that expect to deliver large profits years later.

This week, the pain spread far beyond the technology sector, which frightened many investors. Major retailers reported that their profits were hurt by rising costs and supply chain disruptions, leading to a sale that led to Target and Walmart‘s

worst decline in one day since the Black Monday crash in 1987. As investors took stock of how inflationary pressures and declining growth could weigh on corporate earnings in the coming months, equities fell in everything from banks to real estate investment funds to grocery chains as well.

The madness in the sale sent investors and analysts a strong message: There are few, if any, secure parts of the stock market this year. On Friday, shares in energy companies, which have benefited from rising oil prices, even fell along with the broader market.

“It is clear that in a very short time we have gone from a pandemic to an inflation scare to now, serious concerns about growth,” said Brian Levitt, Invesco’s global marketing strategist.

Economists at Goldman Sachs estimate that there is a 35% probability that the US economy will enter a recession sometime over the next two years. Economic downturns have historically been bad news for equities: Going back to World War II, the S&P 500 has fallen an average of 30% from top to bottom during recessions.

Until the Fed convinces investors that they can tighten monetary policy and accelerate inflation without triggering a downturn, markets are unlikely to stabilize, analysts said. The central bank’s job will be made more difficult by factors beyond its control that have contributed to inflationary pressures this year, including China’s zero-Covid policy and Russia’s invasion of Ukraine.

“We still need to build more evidence to convince markets that a soft landing is possible,” said Arun Sai, a multi-asset strategist at Pictet Asset Management.

Government bonds rose on Friday, benefiting investors from flocking to assets that tend to perform well in times of economic stress. The benchmark index for 10-year US government bonds fell to 2.795% on Friday from 2.854% on Thursday, heading for a third consecutive day of falling. Bond prices rise when interest rates fall.

Meanwhile, disappointing earnings results led to large movements in some stocks.

Shares of Ross Stores fell 24% after declining sales and said they expect another drop in sales for the current quarter. The dealer, like many other businesses, said the results were hurt by rising transportation and labor costs.

Agricultural equipment manufacturer Deere fell 15% even though it posted higher sales and profits and increased its profit forecast for the year. The company said that supply chain problems disrupted production levels and deliveries, and that higher costs for materials and freight transport were pushing up profit margins.

Most S&P 500 companies have managed to produce earnings this quarter that have beaten expectations, said Kiran Ganesh, a multi-asset strategist at UBS.

What is less clear is how companies will fare in the coming months.

“The question is from the next quarter onwards, where we will have the full effect of the jump in oil prices and the war in Ukraine,” Ganesh said.

Brent oil, the global energy reference, ended up 51 cents per barrel, or 0.5%, at $ 112.55 on Friday. Bitcoin, the world’s largest cryptocurrency, fell around 5% to $ 28,734. The exchange rate has fallen almost 58% since its record high in November. Abroad, Stoxx Europe 600 increased 0.7%. Asian stocks also rose, with the Shanghai Composite climbing 1.6% and Hong Kong’s Hang Seng jumping 3%. Write to Akane Otani at akane.otani@wsj.com and Anna Hirtenstein at anna.hirtenstein@wsj.com