The stock market hasn’t been doing so well lately. As the market flashes a yellow light, more strategists are bracing for a possible 10% retracement. After retreating over the past month, the major stock indexes are well away from their all-time highs. The Dow Jones Industrial Average is down more than 6% from its December 4 all-time high, while the S&P 500 is down more than 4% from its December 6 high. The Nasdaq is down more than 5% from its December 16 high. These moves, coupled with recent trading action, have some observers worried that the market will only get worse before it gets better. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, included expectations for a 5% to 10% correction in her S&P 500 target for this year. She predicts that as long as the broad market index can overcome recent volatility, it could end the year at 6,600 points – a 13% increase from Friday’s closing price. At Risk “(We) are very aware of 6,600 and we expect a 5% to 10% pullback early this year,” Calvasina told CNBC’s “Squawk Box” on Monday. “(If) we get over 10% of our target, I think there’s risk to that target, but I think we can live with a 5% to 10% swing.” “And, you know, the last few days, it looks like that’s where we are moving forward. direction,” Calvasina added. “We’re very close to that 5%.” Utilities could become a defensive safe haven if a drawdown of that magnitude occurs, she said, noting that her holdings in the stock are overweight. .SPX 6M Mountain S&P 500 Over the past six months, Javed Mirza, quantitative and technical analyst at Raymond James, said the price chart points to a “medium-term (1-3 months) correction phase in Most of the dominant U.S. stock indexes, including the S&P 500 and Russell 2000, triggered sell signals that he said should usher in a “correction” typically defined as a decline of 10% or so from a high. More. Hackett added that such pullbacks are a healthy part of the market cycle and typically occur every 18 months. Signs of Trouble There have been some recent signs in the market that have investors wary. The big technology leaders that supported the market last year have succumbed, with shares of Nvidia and Apple down more than 10% from recent highs, and the rebound in the fourth quarter failed to expand to other industries and groups. On Monday, the yield on the 10-year Treasury note, used to price mortgages, credit cards and auto loans, hit its highest level since November 2023 and approached the key 5% level, which could further put pressure on an already fragile market. . The benchmark yield last traded at around 4.77% on Monday night. US10Y 5D U.S. 10-year Treasury yield surges To be sure, most strategists are confident the market’s long-term trend remains bullish, calling the recent slide a natural reaction to last year’s boom. They said strong fundamentals for everything related to artificial intelligence and strong performance from seven major stocks (Apple, Microsoft, Nvidia, Amazon, Tesla, Meta and Alphabet) can still support the S&P 500. There is no long-term downturn,” Nationwide’s Hackett wrote. “This is a textbook case of the market getting ahead of itself and correcting itself – healthy, in line with expectations and ultimately constructive for the long-term stability of the market.” Royal Bank of Canada’s Calvasina said the outlook for the stock market will ultimately depend on the outcome of the upcoming earnings season. strength and the future direction of inflation.
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