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S&P Rout Has Room to Go If Bond Spreads Have Anything to Say

  • Similar credit stress led to two recessions, three corrections
  • More losses may be in store for stocks if history is any guide
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The VIX's Wild Ride: Will It Recover This Week?

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Credit markets foretold the selloff in U.S. equities. Should they also prove prescient in calling its extent, stock bulls have more to worry about.

In the three times when the extra yield bond investors demand over Treasuries has climbed as much as it has since May, the Standard & Poor’s 500 Index has lost an average of 18 percent, according to data compiled by Bloomberg since 1996 that excludes recession years. At its lowest level last week, the benchmark gauge for American equities was down 12 percent from its May peak.