The S&P 500 is on the verge of a bear market. Here is the threshold.

The recent bull market in US stocks was nearing its end on Thursday afternoon, with the benchmark S&P 500 remaining just below the threshold marking bear territory.

The S&P 500 SPX,
fell 73 points, or 1.9%, to 3,860.88 in afternoon trade after ending about 18% below its record close from early January on Wednesday. A close below 3,837.25 would represent a 20% decline, according to Dow Jones Market Data, meeting the widely held technical definition of a bear market.

The S&P 500 entered correction territory last month — a 10% drop from a recent high — its second such foray this year. A rough April for stocks was followed by an ugly May in which stocks suffered as investors continue to dump megacap tech stocks and other high-flying pandemic darlings, while investors tremble over inflation, which remains at historically high levels, and a Federal Reserve , struggling to quickly raise interest rates and otherwise tightening monetary policy to get these price pressures under control.

Hopes that a much-anticipated April CPI reading would show on Wednesday that inflation had peaked and would help stabilize the ship offered little comfort to nervous investors. While annual inflation growth slowed to 8.3% from 8.5% in March, it was still hotter than the 8.1% expected by economists. In addition, a key CPI reading, which excludes groceries and energy, showed an unexpected monthly increase.

Read: After inflation data fails to offer a ‘turning point’, what’s next for stocks and bonds?

The S&P 500 is down 6.5% so far in May, while the tech-heavy Nasdaq Composite COMP,
which entered a bear market earlier this year is down 9.6% so far in May, and the blue-chip Dow Jones Industrial Average DJIA,
fell by around 5.2%.

Dow Jones market data

The S&P 500 ended its last bull market on March 12, 2020 as the outbreak of the COVID-19 pandemic sent stocks plummeting. The bottom of the pandemic-inspired bear market came on March 23, 2020, with the S&P 500 posting a 33.9% decline from its February 19, 2020 bull market peak.

Based on numbers going back to 1929, according to Dow Jones Market Data, the average bear market sees a 33.5% drop from the peak to the bottom of the bear market and a median drop of 33.2%. On average, it took the S&P 500 80 trading days to bottom after entering a bear market — and an average of 52 trading days, the data showed. The S&P 500 is on the verge of a bear market. Here is the threshold.

Brian Lowry

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