What a U.S. Bear Market Would Look Like Now
The Dow Jones Industrial Average traded above 12,700 in early May and then again in early and late July. It dropped to 11,300 by the end of Friday's trading, representing a collapse of 11% from that peak. A 20% fall would take the index down further to 10,200. So the DJIA could have another 1,100 points to slip.
Banks and Auto Makers Pull Market Downward
But financial shares are what could pull the market lower again this time, as concerns about bank balance sheets and poor earnings drive their shares down. Citigroup's stock (C) is off 25% in the last month, and Bank of America's (BAC) shares have fallen nearly 30%. Another set of stocks which have moved close to bear territory are GM (GM) and Ford (F), which are proxies for the U.S. manufacturing base. GM is down 17% in the last month while Ford is off 22%. Weak auto sales in July -- and concerns that the economic dip could make that situation worse -- have driven car stocks down and could well drive them lower.
Technology stocks have been critical to the rally that moved the market to recent highs. Some of the shares in big tech companies have begun to falter on concerns that large IT customers will cut back on purchases to preserve their margins. Shares of bellwether Cisco (CSCO) have slid 17% in the last month, while Dell (DELL) shares have fallen 15% in just the last three weeks
The U.S. markets may well slide again this week. There are certainly indications that could happen in the next two or three days.The market is closing in on bear territory, and more bad economic news could place it firmly there.