Stocks likely bottomed this month following the September inflation report as investors scramble to exit the bear market, analyst says

• Stocks likely reached a bottom on the day of the S&P 500's big swing sparked by the September inflation report, said Carson Group.
• "The action last Thursday had some of the hallmarks of a capitulation low," chief market strategist Ryan Detrick said.

October may still prove to be a bear-market killer as stocks likely reached a bottom on the day of the S&P 500's big swing following the latest US inflation report, according to one market strategist.

"The action last Thursday had some of the hallmarks of a capitulation low," Ryan Detrick, chief market strategist at Carson Group, wrote in a note this week.

He drew readers back to the wild session on October 13, when the S&P 500 logged an intraday swing of more than 5%, after erasing steep early losses to finish up by 2.6% at 3,669.91.

The S&P 500 hit a 52-week low of 3,491.58, and sessions such as that have marked "major turning points" for stocks, he said. The most recent example was in March 2020 when the S&P 500 began recovering from a 9.5% one-day plunge spurred by panic over the COVID-19 pandemic.

Last Thursday's slide was sparked by the shock September inflation report as the core CPI reading came in at 6.6%, hotter than the 6.5% Bloomberg consensus estimate. The odds of a 75-basis-point rate hike at the Federal Reserve's December meeting nearly doubled after the CPI report.

"In the history of bear markets, it is safe to say stocks haven't ever bottomed on good news, the news is always horrible. Last Thursday morning felt like that," said Detrick.

In tracing back bear and near-bear markets to World War II, Detrick noted that six of the last 17 ended in October, with an average decline of 29.6% and lasting about a year.

"The current bear of 25.4% and 9.3 months is in range for what history tells us is normal," he said.

He also pointed out that the S&P 500's retracement of 50% of the previous bull market near 3,500 is a common level where investors have stepped in to bargain hunt. "Multiple times going back the past decade this trendline was support," he said.

Meanwhile, fewer stocks last week made 52-week lows than when the S&P 500 reached a low in mid-June.

"Simply put, if not as many stocks are going down, it is hard for the index to continue to go lower," Detrick said. "The stage could be set for a well-deserved fourth-quarter rally."

On Friday, the S&P 500 was higher at 3,677 as trading got underway after futures suggested a decline for the broad-equity index.