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Just when the stock market seemed to be getting used to the idea of the Omicron variant of Covid-19, Federal Reserve Chair Jerome Powell had to go and spook it with talk of a quicker taper. Now, the S&P 500 is threatening to break support.

The S&P 500 was holding its own Tuesday morning despite comments from


Moderna’s

(MRNA) CEO about the efficacy of its current vaccines against the Omicron variant, with the index trading near 4640 at around 10:45 a.m. That all changed when Powell started talking. His comments on possibly speeding up the taper—even as the new variant threatens to slow economic growth—weren’t taken well, and the three major indexes started sliding. By 11:40 a.m., the

S&P 500
and

Dow Jones Industrial Average
were down 1.5%, while the

Nasdaq Composite
was off 1.6%.

The S&P 500’s drop threatened to bring the index below Friday’s close, of 4594.62, and the further it slides below that level, the more likely support will have broken. Support is the term technical analysts use for the level where buyers can be expected to come in when an index or stock is falling. When it breaks, it usually means that more declines are ahead.

In a note released Tuesday morning, Instinet’s Frank Cappelleri observed that by rallying on Monday, the S&P 500 had negated a “bearish pattern” that would have targeted 4540. If today’s drop holds, that level could be in play again. After that, don’t be surprised to see the S&P 500 target 4,500, down 4.3% from its all-time high of 4704.54.

After that, we’ll really start to get worried.

Write to Ben Levisohn at ben.levisohn@barrons.com

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