Analyzing the market sell-off: Routine S&P 500 correction or something more serious?

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Last week's 2.6% slide in the S&P 500 also reflects the more disorderly risk-fleeing action that follows a broken uptrend.

It's as if the market is pre-grieving the demise of the economic expansion while it remains very much alive – vigorous, even. The S & P 500 's three-month correction deepened to more than 10% off its peak during a week when third-quarter GDP was reported at a sizzling 4.9% annualized rate, inflation continued to ease slowly and corporate earnings growth is coming in three-percentage points ahead of forecasts with the requisite three-quarters of all companies beating expectations.

Bank of America equity and quantitative strategist Savita Subramanian points out that "Consensus long-term growth expectations for S & P 500 earnings have dropped to record lows, a rather powerful contrary indicator." She has an index target of 4600 for year's end, essentially a round trip to the July high.

 

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