Stocks in the S&P 500 Extend Their Downward Slide to Break a 'Tight' Uptrend Channel

Bespoke Investment Group, a research and analysis firm, observed a significant decline in the S&P 500 index on Monday, marking the disruption of the "tight" uptrend trading channel that had persisted from October through March.

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April has seen a downturn in the U.S. stock market, with the S&P 500 sliding by 3.7% this month through Monday, as per FactSet data. The index experienced a notable 1.2% drop on Monday, trimming its year-to-date gains to 6.1%.

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Bespoke highlighted the trajectory of the SPDR S&P 500 ETF Trust (SPY) in the chart, noting that the uptrend has yielded to a series of recent lower highs and lower lows this month.

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"We can't expect to remain in an uptrend indefinitely," Bespoke remarked, indicating that the market has entered a consolidation phase at the very least, and potentially a short-term downtrend, contingent upon investors' reactions to the upcoming earnings season.

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The commencement of corporate earnings season by Wall Street banks has seen varied responses, with shares of Goldman Sachs Group Inc. rising by 2.9% on Monday in light of its stronger-than-anticipated first-quarter results.

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Keith Lerner, co-chief investment officer at Truist Advisory Services, commented that the ongoing first-quarter earnings season will offer further insights into the economic landscape and corporate profit margins.

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Despite the equity pullback likely having further to go, Lerner maintained that the primary trend in the stock market remains positive. He cited robust earnings estimates for the S&P 500, a resilient economy, and oil prices not posing significant concerns despite escalating geopolitical tensions.

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Monday's trading session witnessed the U.S. stock market closing lower as investors assessed fresh data revealing higher-than-expected retail sales in March. This unexpected surge in retail sales led to an increase in Treasury yields, which exerted downward pressure on equities amid apprehensions that robust consumer spending could sustain inflation and higher interest rates.

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Economists at BofA Global Research described the March retail sales report as unequivocally strong, albeit with some gains appearing idiosyncratic.

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The yield on the 10-year Treasury note surged to 4.627%, the highest level since November 13, according to Dow Jones Market Data.

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Investor attention also gravitated towards geopolitical tensions in the Middle East following Iran's attack on Israel over the weekend, with a particular focus on crude oil prices. U.S. oil prices settled slightly lower on Monday at around $85 a barrel.

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The S&P 500 closed Monday at 5,061.82 points, down by 3.7% from its record close on March 28, according to Dow Jones Market Data.

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Bespoke noted historically that the market has shown significant rebounds after substantial declines on Mondays compared to other weekdays, although the efficacy of "Turnaround Tuesday" has recently been less pronounced.

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