The S&P 500 has fallen to its lowest level in a year. According to Sam Stovall of research firm CFRA, further declines are expected that could push the index below the 4,000 threshold, writes Business Insider.

A massive, widespread market selloff has sent the tech-oriented NASDAQ Composite down more than 5%. The S&P 500 Index fell 4%, touching an intraday low of 4106.01, its weakest point since May 2021. A simultaneous selloff in the bond market lifted 10-year Treasury yields to their highest level since 2018.

The carnage wiped out a rally in stocks on Wednesday as the Dow Jones Industrial Average soared more than 900 points after Fed chief Jerome Powell said the central bank was not actively considering a 75 basis point interest rate hike.

“The stock market reacted positively yesterday, whereas today the bond market reaction is more of a negative,” Sam Stovall, chief equity analyst at independent investment firm CFRA, said in an interview.

“The bond market is showing: ‘The Fed is not aggressive enough.’ As a result, the 10-year bond yield is now approaching 3.1%, and that higher yield is now spooking both the bond and equity markets,” he said.

“It’s really a tug-of-war between the bond market, which wants more aggressive action by the Fed, and the stock market, which wants the Fed to act at a more moderate pace.”

Technology stocks have been hit particularly hard. And more trouble is likely ahead because of the Fed’s hawkish stance, putting further pressure on bond yields.

The Fed is in a rush to bring down inflation, which accelerated to 8.5% in March, the fastest rise since December 1981. The meeting will be held June 14-15.

According to Stovall, the S&P 500 could fall even lower.

“I said a while back that I thought 3,800 on the S&P 500 seemed like an appropriate level for several reasons,” he said. “First, from a fundamental standpoint, the average P/E of forward 12-month earnings since 2000 is 17. And 17 times expected earnings for 2022 gives us about 3,860.”

Two technical indicators – the Fibonacci retracement level and the head-and-shoulders pattern – also point to the S&P 500 falling to 3800, which represents about an 8% further decline.