The next stock market move is lower. It’s not just Russia and the Fed.


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The floor of the New York Stock Exchange on Friday.

Spencer Platt/Getty Images

The only thing between the stock market and a full-scale correction could have been a long weekend.


S&P 500 Index

fell 1.6% last week, while

Dow Jones Industrial Average

fell 1.9% and the

Nasdaq Compound

lost 1.8%.

Despite all of this, it’s easy to look at this market and see losses as a win. The week’s decline was uncomfortable, but the S&P 500 is still 0.5% above its January closing low. It was beaten by Ukraine and Russia and concerns over the Federal Reserve and rising interest rates over the past three weeks, but failed to hit a new low. The index even managed to rebound after a near correction on Friday, although it still ended the day lower.

But it may only be a matter of time before the ground beneath the market gives way. For one thing, he was unable to rally on days when it looked like he should have. On Thursday, oil prices fell, as did bond yields and the likelihood of a half-point rate hike. That should have been good news. Instead, the Dow fell 1.8%, its worst one-day drop of the year.

However, the reduction in Friday’s losses after another big drop could be less than it looks, if only because of the long Presidents’ Day weekend – a weekend of which, if you are a trader, you may prefer to profit without having to worry about Tuesday’s action. “We continue to urge caution and want to see a real push before stepping in to buy this market,” says Nicholas Colas, co-founder of DataTrek Research.

This flush has already happened for some parts of the market. Around twenty shares in the

Russell 1000

fell 15% or more in the past week, including


(symbol: ROKU),






(ALB), and

World Paramount

(PARA), formerly known as ViacomCBS. the

iShares expanded the technology software industry

The exchange-traded fund (IGV), which holds some of the most speculative tech names in the market, fell 5.4% last week and 18% this year.

More sales may be on the way. The decline in U.S. stocks was driven by a rotation from the U.S. to Europe and from growth stocks to value, according to Citigroup strategist David Groman. But the dollar amounts driving the turnover have been relatively small, he says, which could mean there’s more to come.

“[We] have seen very tentative signs that these trends may be reversing,” writes Groman. “There is still plenty of capital available to drive additional rotation.”

Russia will likely remain a problem, says Lori Calvasina, head of US equity strategy at RBC Capital Markets. The problem could be even bigger for Europe, where a recession could be in sight. “We continue to believe that geopolitical risk emanating from Russia/Ukraine is not priced into the US equity market, should conditions worsen, and will be a key issue to watch in the weeks and months ahead. “, she writes.

The market, however, will still have to contend with the Fed. Yes, odds of March half-point rate hike dwindled. But if the Fed hikes just a quarter point, that could mean it needs to go faster for the rest of the year if inflation data doesn’t ease.

For now, the path of least resistance for the market still looks lower.

Write to Ben Levisohn at [email protected]


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