Market Extra: The Dow just tumbled into a bear market — here’s how long those downturns last on average
It’s the end of a bullish era for the stock market and the beginning of a new phase of bearishness, after a sharp plunge for risk assets on Wednesday pushed the Dow Jones Industrial Average into bear-market territory for the first time in more than a decade.
U.S. equity indexes on Wednesday mostly resumed a downtrend that saw all three major U.S. equity gauges touch bear-market territory, commonly defined as a decline of at least 20% from a recent peak. The declines deepened after the World Health Organization declared COVID-19, the infectious disease that was first identified in Wuhan, China, in December, a pandemic.
The illness has infected more than 124,000 people and claimed nearly 4,600 lives worldwide, with market experts fearing that pandemic could disrupt global supply chains and drive the global economy into recession.
, composed of 30 blue-chip companies was pulled lower by a powerful decline of 18% in shares of component Boeing Co.
which helped drive the price-weighted index into a bear market. The S&P 500
and the Nasdaq Composite Index
narrowly missed ending at those levels.
On Wednesday, the Dow plunged 1,464.94 points, or 5.9%, to settle at 23,553.22, while the S&P 500 fell 4.9%, to 2,741.38, missing a bear-market at or below 2,708.92, while the Nasdaq tumbled 4.7%, to end at 7,952.05, avoiding its bear level at 7,853.74.
A bear market is widely defined as a drop of 20% from a recent peak. Stocks dropped into correction mode — defined as a pullback of 10% — late last month as fears over the economic impact of the coronavirus outbreak began to rise.
There is some hope, however, that a stint in bear-market territory will be short-lived if the viral outbreak is effectively mitigated by governments and central banks across the globe. Historically, the period in the jaws of a bear can be lengthy.
On average, a bear market for the Dow lasts 206 trading days, while the average bear period for the S&P 500 is about 146 days, according to data from Dow Jones Market Data. The Dow is currently off 20.3% from its Feb. 12 record, while the S&P 500 and Nasdaq are 19% from their Feb. 19 peaks.
Here’s how the rest of that data looks like, according to Dow Jones (see attached table):
The move for the Dow also represents the blue-chip index’s fastest move from a record high to a bear market since 1931 — 19 days. In November 1931, as the Great Depression was enveloping the U.S., the Dow took a brisk 15 days from a record to a drop of at least 20%.
Perhaps fittingly, the end of bull-market run for the Dow comes only two days from its 11-year anniversary on Monday, as worries about the economic impact of the spread of COVID-19 have been accelerating by the day.