Is the stock market falling?  The burden of experts

Is the stock market falling? The burden of experts

The Nasdaq 100 (^NDX) has lost 5.7% this week alone. The S&P 500 has fallen 4.7% over the past five days, following a higher-than-expected inflation print coupled with gloomy warnings from FedEx ( FDX ).

In the continuation of our series, “What to do in a bear market,” Yahoo Finance asked experts if markets are headed down from here.

The Nasdaq Composite (^ IXIC) was hit particularly hard this week. What’s next for the tech index?

The Nasdaq took off last week’s low of 11,900, notes Fiona Cincotta, senior financial markets analyst at City Index.

“There are more downsides,” he said Friday. So, how much further?

“Sellers will look for support around 11,430 against 11,036, the 2022 low. On the flip side, a rise above 12,650, the bearish trendline resistance, would open the door to 12,900, the weekly high,” he continued.

What about the S&P 500? (^GSPC) ?

The broader market index closed below 3,900 on Thursday, causing accelerated losses that afternoon and further declines on Friday.

“The S&P 500 continues to retreat ahead of next week’s FOMC meeting as investors worry that a hawkish Fed in a weakened economy threatens a recession,” said Sam Stovall, chief investment strategist at CFRA Research.

S&P 500 set to break June 16 lows?

“The S&P 500 is about 6% above a year-ago low reached in mid-June. “History suggests, from a technical and market sentiment perspective, previous lows may need to be tested and held to create new support from which the market can move,” Bill Northey, senior director of U.S. investments, told Yahoo Finance Bank Wealth Management.

Ann Berry, founder of Threadneedle Ventures told Yahoo Finance Live, said she believes “the worst is yet to come.”

“I think the S&P could see another 10-15% correction to the downside unfortunately. And I think it’s really exposed to downside risks depending on how energy prices continue to move especially internationally,” he said.

Ross Mayfield, investment strategist at Baird, acknowledges that the possibility of a dip below the June 16 level has increased.

“At this point, I would still be somewhat surprised if the June lows were removed, but the odds have certainly increased as inflation has proven stickier than expected,” he said.

How should investors position themselves if markets fall lower?

“High quality and defensive companies tend to perform better in these environments. A focus on cash flow generation, high quality management and earnings stability should be rewarded. Sectors like Utilities and Staples have become expensive, but they provide defensive attributes,” said Mayfield.

“We also like Health as a late-cycle growth play,” he added.

Meanwhile, US Bank Wealth Management’s Northey said: For now, we recommend an underweight position in global equities relative to long-term targets and a corresponding overweight position in fixed income and global infrastructure.”

He added, “Within fixed income, the emphasis is on high-quality taxable and municipal bonds, as well as specific exposure to short-term US Treasury investments to manage overall risk exposure if interest rates continue to rise.”

Which sector can we expect to be affected by further pullbacks?

“During this decline, and unless the June 16 low holds, defensive sectors (consumer staples, healthcare and utilities) will continue to outperform relatively, while communications services, consumer discretionary and technology will underperform,” he said. Stovall of CFRA Research.

Ines is a markets reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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