NEW YORK (Reuters) - The S&P 500 entered bear market territory after the open on Tuesday, down over 20 percent from its 2011 high, as European officials considered making banks take bigger losses on Greek debt and fears of contagion in the world's financial system grew.
GREG FLEMING, HEAD OF THE MORGAN STANLEY WEALTH MANAGEMENT AND MORGAN STANLEY INVESTMENT MANAGEMENT DIVISIONS
"The level of volatility and instability in the market is challenging for institutional and retail investors and their psyches. We have seen retail investors stay stable in this situation. Our financial advisers are talking to their clients and talking about where they are from a personal standpoint. Our financial advisers are probably doing it more than usual. Anybody who is watching the markets every day would be more nervous."
GREG SALVAGGIO, VICE PRESIDENT, CURRENCY TRADING, TEMPUS CONSULTING, WASHINGTON
"The market is very uncertain about direction. I think fundamentals have gone out of the door because if you look at U.S. economic data as of late, the data has been showing signs of U.S. recovery and equities should be moving higher. However, there's significant concern about contagion within the euro zone, Greek default and really what effect a Greek default is going to have on the financial sector. We have already seen the pressure that Morgan Stanley has come under. What you're seeing on the back of that is investors are striving for safety and the only investment that's now viewed safe -- because gold is no longer viewed as safety -- is cash and U.S. bonds.
"I think you have to take a wait and see approach. There is not as much selling as I thought there would be this morning. If it was bear market territory, you would expect everyone to be selling this morning, but we're not seeing that.
"Friday's job report is going to be of paramount importance. That's much more important looking out the next couple of days than this bear market territory, technical indicator stuff."
GEORGE GONCALVES, HEAD OF U.S. INTEREST RATE STRATEGY, NOMURA SECURITIES INTERNATIONAL, NEW YORK
"The Treasuries market has priced this in already. The stock market is only catching up now. It is only now realizing that the illusion of growth we have had was all based on stimulus and it needs more stimulus. There'll be more pain and the pain is the destruction of wealth.
"The chipping away at the wealth created by QE2 is almost complete. This has to make the Fed nervous.
"'Twist' is not an effective tool. The Fed should be creating more reserves, not changing the composition of its Treasuries holding. I think the Fed miscalculated and it should be providing additional cash."
GARY THAYER, CHIEF MACRO STRATEGIST, WELLS FARGO ADVISORS, ST.LOUIS, MISSOURI
"We're getting close to a technical definition of a bear market. We still see our economy doing okay and normally in a bear market, you're in a recession. The stock market declines show increased worry about recession, but we still see some signs that the economy is growing and not contracting. Car sales look good. People may not be feeling good, but they're buying cars. I'd be more concerned if we were seeing consumer spending drop along with sentiment, but that does not seem to be happening.
"The markets are worried. Investors are uncertain about what's happening in Europe and until we see some of that uncertainty cleared up, we are likely to have highly volatile markets. You find when the markets go down investors get very concerned, rightfully so. But there's an old saying that the stock market has predicted nine of the last five recessions.
"The stock market is not a perfect predictor of the economy though it's an excellent reflection of sentiment. With all this uncertainty, investors look for safety and right now the Treasury market is attracting those investors. U.S. markets are doing better than overseas markets, helping the dollar."
WILLIAM LARKIN, FIXED INCOME PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT, SALEM, MASSACHUSETTS:
"My take on it is that Europe, from a leadership standpoint, is looking a little more unstable, so you've got that feeding in, and we are also coming into earnings season. There are a lot of excuses to disappoint, and guidance going forward is going to be very challenging, which means that a lot of the valuations are likely to get dinged in here. From that standpoint, why not raise some cash, be more defensive going into that. It is too much of a headwind.
We are going to see lower (Treasuries) yields if it is possible. If you had asked me a year ago that yields would get this low I would say that you are crazy. 2.72 percent on the 30-year? That is beyond my comprehension.
Cash looks great. Right now you have to be very careful."
MICHAEL WOOLFOLK, SENIOR CURRENCY STRATEGIST, BNY MELLON, NEW YORK
"There are two separate issues here. Are financial markets pricing in more risk and uncertainty? Yes, no question. Will things get worse before they get better? Yes. The same pattern we've been seeing of people allocating away from stocks and toward cash and bonds should continue until a Greek resolution is in place. That's the most important issue. But this does not imply a double-dip recession in the United States. There is stimulus in the pipeline here that should help maintain growth in the future despite all these ongoing debt difficulties. A double-dip scenario in Europe is also unlikely given continued export-led growth in Germany."
JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE RIVER, NEW JERSEY
"The dollar gets stronger, there are more safe haven flows. Nobody is going to dollar assets for return, just for safety."
LINDSAY PIEGZA, ECONOMIST, FTN FINANCIAL, NEW YORK
"We saw a lot of back and forth between the U.S. and China about this impending trade war. Just the fact that we're going back and forth over raising further barriers to growth is causing anxiety.
"Another factor is Dexia -- the Belgian bank coming under structural problems and needing to get bailed out. The European banking community is continuing to hold this unsavory debt on their balance sheets and they continue to try to work through that.
"More and more analysts in the U.S. are suggesting that there is no solution to the European problem and they're just pushing the problem down the road.
"If we do see a European recession that would be very very bad for the equity markets. That will dampen global growth prospects."
ERIC GREEN, SENIOR PORTFOLIO MANAGER AND DIRECTOR OF RESEARCH AT PENN CAPITAL MANAGEMENT IN PHILADELPHIA, WHICH OVERSEES $6.5 BILLION
"The bear market is just a number that the media likes to use; I don't see people changing strategies because of it. It feels like we're getting oversold, but the weakness has persisted a lot longer than people were anticipating."