In 2020, the S&P 500 index was in correction territory for only 19 trading days before receiving support from the Federal Reserve, leading to a sharp surge in stock prices.Thank you for reading this post, don't forget to subscribe!
According to Dow Jones Markets data, the S&P 500 index SPX has now registered its quickest stint in correction territory in 10 years, taking 19 days to consolidate.
Friday’s ongoing stock rally suggests the possibility of another swift recovery exit before the Thanksgiving holiday, buoyed by the sharpest decline in US Treasury yields since October.
At present, the S&P 500 has been in correction territory for 16 trading days and reached an intraday high of 4,520.12 on Friday, bringing it closer to the closing level of 4,529.11 required for an official exit.
A correction is commonly defined as when a stock or index closes at least 10% below its previous peak, and an exit occurs when the correction closes at least 10% above the low.
In a positive development, the Nasdaq Composite Index COMP emerged from its correction status on October 25 after 14 days for the tech-heavy equity gauge.
Throughout history, the S&P 500 has experienced a total of 103 market corrections, including the current correction that began in October. Some corrections lasted for as short as four days, as seen in 1932, 1987, and 2008, according to Dow Jones Markets data.
The longest corrections, accounting for over a quarter of the total, spanned from more than 60 trading days to 238 days.
This year, the S&P 500 has been driven higher by the “Magnificent 7” stocks and a recent decline in long-term bond yields supported by the economy.
A decrease in bond yields could help reduce financing costs for US corporations, households, and the government, particularly as recent economic data indicates signs of weakness.
LPL Financial analyst John Lohse suggested in a client note on Friday that a further decline in inflation and a favorable technical landscape for stocks by the year’s end could lead to a repeat of the S&P 500’s January 2022 record high.
“Technical assessment shows a recent breakout above the resistance at 4,400 and a potential retest of the key 4,600 level,” he stated. “The next six weeks are some of the best seasonal weeks for stocks on the calendar. Although the difference is relatively small, technology-oriented names continue to be a driving force.”
On Friday, the Dow Jones index DJIA was set for a 2% weekly gain, the S&P 500 index was up 2.3% for the week, and the Nasdaq Composite index COMP was up 2.4% since Monday.