Stocks head for another potentially treacherous week, as a slew of retailers report earnings

If there’s more bad news from retailers in the coming week, that could be a negative catalyst for an already cranky stock market.

Market pros are watching for more signs that stocks could be bottoming, though strategists say that is a tricky prospect and there could be false signals.

The S&P 500, on an intraday basis Friday, broke through its prior low to reach bear market levels - trading more than 20% below its record high reached in January. But it did not close there. Instead, it reversed the day’s steep losses and ended the day just slightly positive.

“It is a process. ... This week was scary in breaking through last week’s bottom. These things take time,” said Julian Emanuel, head of equity, derivatives and quantitative strategy at Evercore ISI.

Emanuel said that taking out the lows could signal a buying opportunity, and that the market is in a bottoming process. “Looking medium to longer term, toward the end of the year, we continue to see higher stock prices ahead,” he said.

Stocks were lower in the past week, despite the fact strategists had been expecting the oversold market to bounce. The market initially rallied, until earnings misses from Walmart and Target blew up the gains.

The surprising weakness in those two big stalwart retailers crushed their stocks, hammered the retail sector and took the entire market lower on fears the consumer is wobbling and other companies will also have earnings issues.

Earnings from Costco, Best Buy and others, as well as personal consumption expenditures data, could be important in the coming week as investors weigh how much the consumer is stumbling. The PCE includes data on spending, income and inflation.

The S&P 500 Friday dipped into bear market territory when it fell under 3,837.24, but did not close there. Some Wall Street pros consider it a bear market if a 20% decline is reached in an index on an intraday basis, but others insist the index must close at that level in order for the bear market to be effective.

Regardless, it’s the biggest downturn of this magnitude since the swift bear market decline in March 2020 at the start of the pandemic.

“This is another step in the bottoming process, but we’re going to need follow through. You’re getting a slew of retailers reporting next week – the place that is under the largest microscope of investors, given the blowups we saw this week,” said Emanuel. “It will be absolutely vital for the broad market to respond in a positive fashion to whatever those retailers report.”

While there is no official determination on what a bear market is, strategists so agree that the extent of the bear market, or how far stocks could fall, depends strictly on the performance of the economy.

CNBC