April 18, 1:57pm S&P 500 Index Exits Bear Market Territory
NEW YORK (Reuters) - The Standard & Poor's 500 Index (.SPX) on Wednesday leaped free of the bear market's claws after
the Federal Reserve unexpectedly cut interest rates.
The index, which tracks the performance of America's most valuable companies, rose 51.77 points, or 4.3 percent, to 1243.58
in midday trading -- rising above bear market territory, defined as a drop of 20 percent or more from its high. The intraday rise
took it past 1,221.97, the point at which the index was 20 percent below its March 24, 2000, record closing high of 1527.46. The index fell below that point last
month, on March 12.
The S&P index is still far from bull territory as it would have to rise 20 percent from its lowest closing trough for
the bear market to end, according to one common measure. The current trough occurred on April 4, when the
index closed at 1103.25, or 28 percent below its high.
``You don't know what a bear market is except with hindsight,'' said Sam Burns of Ned Davis Research, a
stock market research firm based in Venice, Florida.
If the S&P reaches 1,323.90, which is 20 percent above its April 4 low, then the current bear market would be
considered over, he said. As bear markets are measured from the prior closing high to closing low, the current
bear would have lasted from March 24 of last year to April 4 of this year.
If, instead, the S&P were to fall again and reach a new low, that low would mark the bear market's end,
provided a 20-percent rally followed thereafter.
The previous S&P 500 bear markets include: a 27 percent drop between Nov. 28, 1980 and Aug. 12, 1982; 48 percent between Jan. 11, 1973 and Oct. 3,
1974; 36 percent between Nov. 29, 1968 and May 26, 1970; and 22 percent between Feb. 9, 1966 and Oct. 7, 1966.
The S&P has narrowly escaped a bear market twice since 1987. In 1990, it fell 20.4 percent on an intraday basis between July 16 and Oct. 11. In 1998, it fell
21.9 percent, again on an intraday basis, between July 17 and Oct. 8.
The Dow Jones industrial average (.DJI), the 30-stock index that is home to the bluest of blue-chip U.S. companies, almost entered its first bear market since
1990 on March 22 when it fell below 9,378.38 on an intraday basis -- or 20 percent below its record high of 11,722.98 reached on Jan. 14, 2000. But the Dow
closed at 9,389.48 on March 22, and since then has trended higher. On Wednesday, it rose 433.33 points, or 4.2 percent, to 10650.06.
The Nasdaq Composite Index (.IXIC) entered bear market territory last year, after reaching a record high of 5048.62 on March 10, 2000, and is currently trading
58 percent below that peak. The Nasdaq on Wednesday rose 178.32 points, or 9.3 percent, to 2101.54. |
