NEW YORK (Reuters) -This week could mark the end of the bull market for Wall Street, with U.S. stocks likely to join a global equity market plunge triggered by fears of a U.S. recession.
Investors said last week a $150 billion White House rescue plan was too little too late, as more and more data signaled the U.S. economy was headed for recession.
If U.S. stocks open at the levels futures were indicating, it would push major indexes dangerously close to bear market territory — or a 20 percent drop from their peak in October. That would mark the death of the bull market that was born in early October 2002.
“What we are seeing today are more signs that the shock waves from the U.S. are still expanding throughout the world, and we are still in the eye of the storm as far as credit issues are concerned,” Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto, said on Monday. The slide will continue on Tuesday, he said, adding that the global equity market rout was due to economic problems in overseas markets as well as in the United States.
The slide could be halted, however, if bellwether companies such as Apple and United Technologies engender hope that the U.S. economy can avert recession.
A slew of major corporations, also including Bank of America Corp (BAC.N), Microsoft Corp (MSFT.O) and AT&T Inc (T.N), will release quarterly earnings in a shortened trading week that has scant economic data scheduled for release.
“Whether or not we end up in a prolonged bear market depends not only on whether we go into a recession but also on how long the earnings weakness plays out,” Kumar said.
Dow Jones industrial average futures on Monday dropped 546 points or 4.5 percent. Should the Dow close lower on Tuesday by the amount the futures suggest, it would rank as the fourth-largest point loss ever for the blue-chip index.
S&P 500 futures were down 62.5 points, or 4.7 percent. Nasdaq 100 futures slid 77.5 points, or 4.2 percent.
The Standard & Poor’s 500 index closed on Friday down 15.33 percent from its peak close on October 9. A fall into bear market territory for the S&P 500 would mean the end of the second-longest bull market for the benchmark index since 1929, according to the Stock Trader’s Almanac.
One major stock index — the Russell 2000 Index (.RUT) of small-cap stocks — entered a bear market last week.
Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said the Russell 2000 is one of the most overvalued major indexes in the world and could tumble perhaps another 40 percent.
On Friday, the S&P 500 fell 8.06 points, or 0.60 percent, to a 16-month low of 1,325.19, capping its worst week in five years. Both the Dow Jones industrial average (.DJI) — off 59.91 points, or 0.49 percent, at 12,099.30 — and the Nasdaq Composite Index (.IXIC) — down 6.88 points, or 0.29 percent, at 2,340.02 — hit 10-month lows.
For the week ended January 18, the Dow fell 4.02 percent and the Nasdaq 4.10 percent.
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