A TWO-year bull run in stocks that began at the depths of the coronavirus panic came close to crashing into a bear market Friday but avoided that fate in the last hour of trading.

The S&P 500 traded 20% below its record closing high of 4,796.56 for most of the afternoon, but it pared those losses to finish basically where it started the day. The last entered into bear market in February 2020.

The broad equities benchmark ended down for a seventh straight week, its longest weekly losing streak since March 2001, while the Dow Jones Industrial Average notched its eighth straight week of declines, the longest stretch since 1923. The tech-heavy Nasdaq 100 Index also ended down for a seventh week, its longest streak since 2011.

The key to the index’s rise and fall is the Federal Reserve, whose unprecedented efforts to boost the economy in early 2020 helped the S&P 500 more than double through the end of last year. Now, with central bankers reining in stimulus as inflation surges, shares are selling off at the hands of investors convinced a recession is all but unavoidable.

“All of this has been driven by two major forces that were reiterated this week: one is inflation and how stubbornly high it is. And the second is how aggressive the Federal Reserve will likely be to get it under control,” said Art Hogan, chief market strategist at National Securities.

Tech stocks in particular are dragging the market lower, with Apple Inc. and Amazon.com posting an eighth straight weekly drop, while Tesla Inc. fell for a fourth one. The group has come under widespread pressure this year. According to S3 Partners, tech is the most shorted sector in the US market, “making up almost $1 out of every $5 shorted.” Software is the most shorted industry within the sector.

Consumer discretionary sector has been the worst performing group in the S&P 500 since the index’s January high, sinking 34%. The only S&P 500 sector to gain during that stretch is energy, which is up 42%.

Friday’s rollercoaster ride capped a volatile week for the US stock markets, which saw consumer stalwarts that thrived throughout the pandemic-era bull market finally buckle.

Target Corp. plunged the most since Black Monday in 1987, a day after Walmart Inc. suffered a similar fate, on signs that runaway inflation is hurting the US consumer and eroding profit margins.

“The Fed has been a primary driver of these market declines, but the latest news from retailers has added additional concerns to the outlook for the economy,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors. “Now that we’ve breached the 20% level, the big question will be where do we go from here?.”

Since 1929, the S&P 500 has entered a bear market 17 times, including Friday, according to data from CFRA Research. The longest period lasted 998 days from September 1929 to June 1932. The shortest was just 33 days from Feb. 19, 2020, to March 23, 2020, CFRA’s data show.

On average, bear markets result in a decline of roughly 38%, although since 1946 the average loss is less than 33%, according to CFRA.

“It was bound to happen because I think the bears wanted to push it there. And a fair amount of people had turned bearish,” said Mike Mullaney, director of global markets research at Boston Partners. “Positioning is catching up with sentiment right now.”

It could only matter to a statistician: the S&P 500’s late-day bounce kept it from closing 20% below its last record, averting the most curmudgeonly definition of a bear market. For now.

To Wall Street analysts trying to keep pace, it’s another twist in a baffling year. But for market historians, it can’t help but ring a faint, bullish bell.

For the record: the S&P 500 fell all the way to 3,810 during Friday’s session, or roughly 20.6% below its record close of Jan. 3, then rebounded to cut the loss to 18.7%. The levels could be dismissed as trivial except for a nagging fact: history holds an improbably large number of examples of such rebounds lasting. In 1998, 2011 and 2018, the benchmark slid either below the 20% level or very near it on an intraday basis – only to reverse itself and never test the bear-market waters again.

“All bottoms, short-term or long-term, are formed by short-term traders, and when the S&P drops about 20%, they tend to dip their toes back in,” said Matt Maley, chief market strategist at Miller Tabak + Co.

The S&P 500 rallied all the way back from a 2.3% drop to close higher by a less than a point on Friday. It couldn’t avert a seventh straight weekly drop, though, the longest stretch of futility since 2001.

Another fact to recall from those near-death experiences of the past: how bullish they ended up being. Consider the 19.4% drop from April 29 to Oct. 3, in 2011, for instance. At that bottom, the gauge experienced three days of gains greater than 1.5% – and continued on to its best month in 20 years. The recovery paved the way for the longest bull market ever recorded, the one that ended in the Covid crash.

Something similar happened in 1998, when the benchmark suffered a drop greater than 19%, bottoming on Oct. 8, before a 2.6% rally spared it from oblivion. From October’s start to the end of January the following year, the gauge surged nearly 25%.

In 2018, the bull market got within points of a 20% plunge on Dec. 24 before turning on a dime right after Christmas. Six days later began a year in which the S&P 500 surged 29% and the Nasdaq 100 rose 38%.

Staying above that 20% level is psychologically important, says Maley. “When it does hold and gain some traction, then the longer-term investors come in and the rally starts to feed on itself,” he added.

Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, says 2018, 2011 and 1998 have been on his mind. “These three episodes notably occurred around periods of Fed tightening and did not accompany US recession,” he wrote in a note. His firm doesn’t predict a recession to happen this time, either.

To be sure, betting that Friday’s price action means a bear market will be averted is to misconstrue the rules of probability. The sample in which past reversals took hold is too small — just three. Moreover, it’s only by the the most nitpicky definition that stocks aren’t in a bear market already. Sentiment has been throttled, earnings are in doubt, and several other big equity benchmarks — among them the Nasdaq 100 and Russell 2000 — have dropped by the requisite percentage.

One could also argue that with the equity rout persisting for more than four months, the hit to investor psychology is already done. By now, this retrenchment is longer than three other bear markets.

While the definition of a bear market is up for debate, it possesses a weirdly predictive link to the real world. Fourteen times the S&P 500 has completed the requisite 20% plunge in the last 95 years. In just three of those episodes did the American economy not shrink within a year. Among 14 recessions over the span, only three weren’t accompanied by a bear market.

“The market is typically way ahead of economic data, so the market is already feeling it – there’s no question about it,” said Scott Bauer, chief executive officer of Prosper Trading Academy. “Something has to pop here.” – Bloomberg / pic by TMR FILE