jon: welcome to "bloomberg markets." kriti: in the last hour and a half we are seeing the s&p 500 hit bear market territory. down 2.2% when it comes to the s&p 500. look at the cross asset action. vix index etc. 32 handle --

nearing a 32 handle. it is panic selling and conviction selling. 277, almost 278.a little less volatility in the bond market. put that into the context of the 12, 14 basis point moves we have seen in the bond market. this looks a little calmer. the dollar should be lower. we are seeing the exact opposite. signaling perhaps a little bit of a haven. jon: it certainly has been another interesting day in the markets. as we started this session there was the willingness to do some buying. we continue to have the stories out of corporate america rattling investors. we have spoken about the retailers, walmart, target. they have shared concerning outlooks. you have names like roth stores -- ross stores. down 20% from the recent peak of

the s&p 500. you have a stock like deere losing 10% of value. they help they have enough gear farmers will buy but farmers are stressed because of inflationary factors. supply chain causing complications for the outlook. you have technology names like tesla. elon musk has had his hands full recently. that's been a concern for some investors. tech has been the easy target for so many investors in the last few weeks and months. it was the growth names that have led us lower. we take a look at the move down from the 1% level -- 20% level, the 20% weakness we have seen from the recent peak. that was at the start of the year in a did not feel that long ago. when you look at the historic chart, have there been times when removed from the peak to be done 20% and a faster stretch? absolutely. when we think about historically

there are a lot of instances going back in history where it takes longer to get to this period. that speaks to how quickly markets have been readjusting to the reality of higher rates in the face of inflation and ongoing complications when it comes to the global economy. kriti: you are 100% right. historical precedent becomes challenging. look at the cross asset pictures. s&p 500 sliding 2.1%. reaction to the bond market. a little bit more of a reaction to the dollar. even foreign investors selling out of the s&p 500. >> we want to keep the conversation going with brian levitt at invesco joining us with his perspective. always nice to see you. some might have seen this coming. we were close a couple of times recently. now that we have seen that 20%

decline from the highs we saw at the start of the year, what is your reaction? brian: the reaction is what we know. inflation hastens tightening cycles and tightening cycles can bring upon the end of business cycles. that is the risk we are grappling with. equity valuations adjust. now equity value -- equities adjusting because of economic activity. you start to look through it and you see volatility up significantly. a pretty big washout with regards to the number of days above -- companies above the 200-day moving average. you look for signs the market may be putting in a bottom. we are not there yet. it's a reminder of how damaging tightening cycles can be. kriti: when we looked at the retailer earnings, walmart, target, the size and scope of it.

a lot of it was the biggest move since 1987. we go back and look at what happened at 90 days seven, black monday, it was this giant rally and a quick splash crash. how much of this is simply a matter of being a flash crash only to pile back in monday morning? brian: we will see where we go on monday. when it think about 1987, the one thing i think about is if you invested $100,000 in it before or the friday before you had $75,000, which hurt a lot. if you had done nothing, you would have well over $2.5 million today. these things are challenging as we go through it. i advised investors to keep their eye on the long-term. in the near term there is some challenges. we still need to see inflationary pressures come down.

the federal reserve will have to tighten policy significantly to do that. i would say investors fling the markets -- fleeing the markets, you try to miss the worst days and often times you missed the best. i hope as we move into the summer we will get some better data on the inflation front. causing 10-year treasury rates to stabilize. commodity prices destabilize. that would allow a big comeback into the equity markets. jon: it's interesting. you talk about indicators. people have been watching the number of s&p stocks below 200-day moving averages. another thing we heard this morning when there was a mood with respect to buying stocks, looking at the valuations of companies. by some measurements seeing the

s&p evaluation of stocks at levels last seen in 2020. when we are talking about the economic road ahead, when we had the kind of week we've had where you got these mighty companies like walmart sharing disappointing outlooks that 'e' in pe becomes problematic. you have to be pretty confident in the earnings picture, i would imagine. brian: that's right. we are stil in a good nominal growth environment. growth is elevated and the economy has been robust. we are slowing here. the economy is going to slow down. you are seeing pressure on margins, some have been very elevated levels. something like 30 times 16, 18 month ago. now 20 times.

we have seen valuations come down but there needs to be a catalyst. valuations don't tell you enough. the economy will slow here. the focus for investors should be on good quality companies trading at attractive valuations through this part of the cycle. it is still not the time to speculate. still not the time to go to a fullbore risk profile. having more neutral risk exposure with an eye on companies that can navigate the difficult environment and the economy slowing. jon: what -- kriti: what beacon does the s&p 500 follow? it was techm the dollar, foreign investors, oil. what cross asset signals should the market be following? brian: the market needs to

see inflationary pressures moderate. as inflationary pressures moderate rates stabilize. some of these businesses, some companies that are good quality businesses that have been beaten up significantly because of the sector they are in or concerns about their ability to get parts or this challenging supply-chain issue, we need to see some type of stabilization in the tech sector. these are the companies that led us to new highs increasingly last year and have been on the cross hairs as inflationary pressures have mounted. a moderation and inflationary pressures would start to go a long way to put some floor under these tech names that are still the largest concentration names of the s&p 500. jon: i was talking at the top of the have power how quickly we saw this 20% slide, basically in

the never of 4.5 months. cap we had periods where it happen faster? yes. stretches where it took longer? absolutely. for most people they are trying to figure out what additional challenges there could be. even looking at some of the historical data from players like cfra, we are talking about declines that can sometimes go well beyond 20%. if you're an investor trying to navigate this landscape, if there is potentially more pain ahead what are some things you are watching for? brian: it is the classic end of cycle dashboard. we need to see inflation moderate. you look to see the shape of the yield curve, which is flat. we would expect it three-month tenure to flatten further. credit spreads. credit has been reasonably well behaved.

spreads have widened out a bit recently. triple c lined up something like 900 basis points. all of that are challenges for the market. we would like to see the opposite of that. inflation down. the fed backing off. some stabilization in the dollar. maybe you are starting to see a bit it with the selloff in bonds starting to relax a little bit. an early sign this valuation adjustment because of higher interest rates is starting away from us. what the bond market is telling us it is concerned about growth. it's concerned about growth now, again, that's when inflationary pressures should moderate and the fed should back off tightening stance.

in the near term i expect more. it tends to be with the vix around 40. we are not there yet. we see bonds was something like 85%, 90% of businesses trading below their 200-day moving average. we are not there yet. we are closer but not there yet. kriti: a vix at 40, a signal to watch. brian levitt, thank you was always for your time. shares of deere taking a beating after disappointing earnings report. what it means for the broader economy. this is bloomberg. ♪

ritika: red on the screen when it comes to the stock market. a little bit of the loss repaired but a 2% decline on the benchmark. we have had that bear market territory. nasdaq taking it on the chin. 2.4% declines perhaps more calm in the rest of the market place. let's take a micro look. deere ontrack since their worst day since 2008 after disappointing quarterly sales. let's head over to joe. thank you for joining us. an interesting dynamic for deere which is seen as an economic bellwether. and they are warning about the man. joe: they finally said in their statement our customers, their farmers are starting to feel

some pressures on the call side. inflation pressures everyone has been feeling. a big part of that is fuel. we know over the past month, couple of months more and more farmers are saying the fuel costs, the actual money of the diesel we have to put into our tractors and other machines are going up to a point they are starting to feel it in the wallet. i think we are seeing this come together. i do still believe the supply-chain issues are really the main problem here. jon: no doubt. in your reporting talking about the costs that going to farming. you are referencing weedkiller as well. everything is going up in price. it feels like we have this new leg of the selloff. the idea this week we shifted the narrative a little bit away from tech stocks that have been beaten up, there valuations were too high, to the retailers like walmart challenged by

inflationary factors. here we go. we start talking about the farm equipment players as the next chapter of dialogue and the global markets. joe: the supply-chain has become the focus for more than just the commodity companies and the manufacturing companies. it's come into the retail sector. one analyst said, listen, it is too bad deere had to report when so many supply-chain issues over and focus in the market is getting hammered by bad news. you pilot more venues on top of a difficult market and you are seeing them getting crushed today. at one point down 14%. we have not seen numbers like this from deere. they upgraded their outlook for the rest of the year. they expected margins to be pretty good. they say they will offset the supply-chain issues, inflation problems to the end of the year because they have pricing power on their machines.

kriti: joe, always a pleasure. let's macro it out. john, always a pleasure. your columns have mirrored a lot of the -- shedding light on historical parallels. this could be another dotcom moment. how much of this is a function of liquidity? john: quite a bit of it is a function of liquidity. the concerns that qt is coming and people have seen a big impact. i would say at the moment this remind me of a macro driven selloff. more like 2007-2008. not necessarily bad as 2008 but we are seeing any number of different shreds of evidence we

have a recession coming. inflation will not be so bad because the economy will tighten up. that is leading to oversized reactions. now it is spreading to deere. that is what is going on at the moment. a top-down macro judgment. jon: fascinating to hear you say that. it felt like in the early innings of the pandemic central bankers were turning to what we saw back in 2008. here we are in this challenged environment where so much of the selling pressure in the equity market has been tied to the reality of higher rates or the expectations we will see moves on that front. clearly the central bankers have been sticking to a messaging. we just had a guest from invesco, brian levitt. we asked about some variables to watch for, maybe the fed starts

to change their messaging. it will be interesting to watch that. john: that is plainly the issue. nobody thinks there is a fed -- if they will be a real recession, if it begins to mess up the full employment, targets, they will start changing the messaging. i don't thing that happens for a month or two myself. i do think the stock market crash -- i do not see the stock market developing into something that can change the fed on its own. that is the next question. does this get -- jon: thanks so much for your perspective. john authers. technology has been one of the challenged sectors throughout all of this. typically becomes one of the easy targets on the down days. everything from semiconductor

players to the software names. mandy, you have been watching this for months now because you initially saw some of that money coming out of sky high valued social media companies. we just continue to see this uncertainty play out in a bigger weight through the tech names -- way through the tech names. >> typically semiconductors lead the pack. now you are starting to see some weakness with semis. i think it is more on the consumer side. the data center command continues to be strong -- demand continues to be strong. therapy -- there are pockets of spending right now. it could still grow 30% and that is a good growth rate when you think about overall spending of around 5%.

there are still pockets of strength but on the consumer side the inventory will result in some weakness across the tech names. kriti: it's pretty clear some names of the fastest growing companies. where is the weakness in terms of fundamentals story? mandeep: smartphone 5. the five-year cycle is strong. you can see on the pc side there was some crossover during the pandemic. you may see consumer pcs really pullback. the names that are there take a hit. kriti: mandeep singh. this is bloomberg. ♪

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jon: this is "bloomberg markets

." we want to dig deeper into this decline of 20% from the record closing level of the s&p 500. abigail doolittle has been tracking this. in most sectors putting us on pace for the seventh week of declines. abigail: the worst stretch since 2001, pretty telling in terms of the kind of action we had this year. he reminds me this stretch of 2001. if you look at a chart of put together for this conversation so we can see this, in 2001, the market peaked in early march. the second peak was in october. you can see down 20%, then up 20%. there were a few more of those into the end of 2002. our peak is early this year, the last year. down about 20%, 10%. the stage is set for some sort of bounce here.

that is true with the vix. the index way out of the money. those are at record lows. the question is will the buyer step in? kriti: thank you so much. as we had to break, the s&p 500 down 1.5%. this is bloomberg. ♪

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caroline: 2:00 p.m. in new york. we are live from bloomberg's both headquarters. special edition of "bloomberg markets: the close." the band is back together. we show you what is technically now a bear market. the s&p 500 just bounce a little bit. you are now 20% off of the recent high.