S&P 500 dips below 4,600, looking at December lows

• The S&P 500 has tumbled below 4,600, losing more than 1.5% as the stock’s pullback continues.
• Concerns about the Fed’s tightening and rising U.S. bond yields continue to be the main driver of the sell-off.

Equity bears have picked up where they left off last week, and the US equity markets They came under heavy pressure again on Monday shortly after the US session opened. The S&P 500 index, have accelerated their decline in recent trading. The index recently fell below the 4,600 level. The bears will look for a test of the late December lows at 4,530 and below that, a test of the early December lows at 4,500.

By the way, there haven’t been many new fundamentals to drive the downside, which instead seems fueled by a continuation of some of the bearish themes that were in play last week. Chief among them is concern about the expected accelerated pace of the Fed’s monetary tightening in 2020 that was initially triggered by last week’s Fed Minutes; Remember that the Minutes showed that FOMC participants agreed that rate increases would soon be justified to combat inflation as long as the labor market continues to adjust and progress.

The US jobs report for December last Friday showed it did both, with another 200,000 jobs added and the unemployment rate falling below 4.0% for the first time since the start of the pandemic. Therefore, the report has been widely interpreted as supporting a possible Fed rate hike as early as March and an early start of quantitative adjustments soon after. This has prompted a chorus of institutions / analysts to publicly review their Fed policy calls in a more aggressive direction. Long-term bond yields continue to climb, with 10 years in the US above the key level of 1.80%, which once liquidated, should open the door to a 2.0% rise.

Higher long-term returns are having their usual impact across different equity sectors, with growth stocks / greats underperforming amid their greater sensitivity to the higher opportunity cost that higher returns represent. The heavy-tech Nasdaq 100 is down more than 2.0% and has now plunged below December lows in the 15,500 zone to trade at 15,200. Value / cyclical stocks that are more closely correlated to the underlying performance of the economy and tend to perform better in a rising rate environment do better. The Dow, which is weighted more heavily towards these sectors, is comparing below 1.5% to trade near 35,750 after losing the 36,000 level shortly after the open.

Technical levels