Dow and S&P in Bear Market?

Posted by Sun on July 2, 2008

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Yesterday, we saw the Dow made a 276-point turnaround to close the trading session with a gain of 38 points. What fueled the rally was the surprising June sales number from GM. And the turnaround actually made people speculate that the second half of 2008 may give investors a better time than the first half did.

Then today, the stock market followed its old pattern, down another 166 points. This time, GM also played a role: despite the stronger than expected June sale, a Merrill Lynch analyst suggested that GM could face bankruptcy (Bloomberg.com). That sent GM shares to the lowest level since 1954!

Since reaching the highest close of 14,164 on October 7, 2007, the Dow has lost 2,949 points. That’s good enough for a 20.8% decline in 10 months, meaning that the index is officially entering the bear market. According to the generally accepted definition,

a downturn of 15-20% or more in multiple indexes (Dow or S&P 500) is considered an entry into a bear market.

The S&P index is slightly better, losing 300 points, or 19.2%. Not exactly there yet, but very close.

So, do you expect this bear market to last long? This is a tough market that even good news is likely to fall on deaf ears. Tomorrow’s monthly job report isn’t expected to be good and that could push the market even lower