Stocks were volatile last week as mostly solid earnings (notably from tech) helped offset early-week concerns about the health of the global economy. The S&P 500 fell 3.27% on the week and is down 13.31% YTD.

From a technical standpoint, last week was downright ugly as the Nasdaq Composite fell to a 52-week low while the S&;P 500 hit new lows for the year electing the downside measured move target of 3,545 out of the bearish head and shoulders that has been in the works since the fall. That shifts the near-term path of least resistance lower; however, we should not be surprised by some volatile bear-market-style rallies in the coming sessions. The next level of notable support lies at 4,060 while to the upside, look for initial resistance around 4,300 where sellers would be likely to step back into the market. The only market positive from a technical perspective last week was that Dow Theory avoided turning bearish by roughly 30 points in the Dow Industrials, which suggests the long-term trend has not yet turned negative—but we are on the brink.

The S&P 500 dropped sharply Friday, broke the 2022 YTD lows, and the technical outlook turned decidedly more negative as markets continue to face multiple headwinds from a hawkish Fed, global growth risks from the Russia–Ukraine war, and global growth risks from China’s “Zero COVID” policy and lockdowns.

Looking at Friday, the negative catalysts were: earnings (AMZN and AAPL, although neither report was that bad, it’s just that the market doesn’t have tolerance for underwhelming numbers right now) and unit labor costs. Yes, the Core PCE Price Index slightly underwhelmed, but ULCs were hotter than expected and that implies inflation is becoming entrenched as wages don’t tend to go down much (they set a floor)—and that will keep the Fed hawkish.

So, while earnings and ULCs were the negative catalyst for Friday (combined with no one wanting to be long into the weekend), the bigger issue is this market is facing a generationally hawkish Fed and real global growth concerns via the war and China’s “Zero COVID” policy. Until we get some catalyst to make the Fed less hawkish, real progress on a ceasefire in Ukraine, or China abandoning the “Zero COVID” policy, it’ll be hard to get a sustained stock rally.

To that point, it’s not that the macro outlook got that much worse last week. Fed tightening expectations didn’t rise materially, the Russia–Ukraine war didn’t expand, and Covid cases in China are actually starting to peak. But it doesn’t really matter because nothing positive happened to reduce any of those risks—and in a market where sentiment is this negative, that leaves the path of least resistance lower. The point is that the past two-week drop in the S&P 500 (which is nearing a 10% decline) hasn’t been caused by a lot of incrementally negative news, it’s been caused by a total lack of any “good news,” so that negative narrative is defining the market and it’s “sell first, ask questions later.”