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Key U.S. stock indexes now in bear markets

August 8, 2011 |  9:39 pm

RIP, bull market?

Unless stocks reverse quickly, Wall Street statisticians will mark April 29 of this year as the end date of the bull market that was born in March 2009, in the depths of the last recession.

As faith in the economic recovery has evaporated, a number of broad market indexes now have fallen more than 20% from their multiyear highs reached on April 29. A drop of more than 20% is the usual threshold for a decline to be considered a new bear market, unless the sell-off is short-lived.

Bear The New York Stock Exchange composite index, which plunged 7.1% in Monday’s market meltdown, now is off 20.5% from its spring high.

Indexes of small- and mid-size company shares are much deeper into bear-market territory after Monday’s losses. Because those stocks are much less liquid than blue chips, they often collapse quickly in horrendous sell-offs as buyers disappear.

The Russell 2,000 small-stock index sank 8.9% for the day and is down 24.8% from its spring peak.

The Standard & Poor’s mid-cap 400 index has fallen 23.6% from its spring high after losing 8.2% on Monday.

The three best-known market indexes aren’t in bear territory yet, but may get there, or close, on Tuesday unless a massive wave of bargain-hunting hits the market.

The S&P 500 index, down 6.7% on Monday, has lost 17.9% since April 29. The Nasdaq composite is off 18% from its spring high after Monday’s 6.9% slump.

The Dow Jones industrial average is holding up best of any major index: The venerable Dow is down 15.6% since April after falling 5.6% on Monday.

Bear markets typically have shorter lifespans than bull markets, because it’s easier for stocks to fall than to rise. (Think: gravity.)

But the last bear was a drawn-out affair: Major indexes peaked in summer or fall of 2007 and took at least 17 months to bottom in March 2009.

If the stock market’s slide is foretelling another recession, share prices most likely would begin to rebound before the recession ends.

But the market has to sense a catalyst for an economic recovery. At the moment, whether the economy is in a new recession or just growing anemically, a catalyst for faster growth is hard to identify -- which is why sellers are a lot more desperate to get out than buyers are to get in.


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-- Tom Petruno

Photo:  A bear sculpture that used to reside outside former California Gov. Arnold Schwarzenegger's office. Credit: Rich Pedroncelli / Associated Press