JPMorgan's Marko Kolanovic said Monday that the recent selling in the market is "overdone," given the broader backdrop of easing bottlenecks and solid corporate margins. "Recent bearishness in equities is overdone, and out of line with activity momentum, easing bottlenecks, and what we expect to be a strong earnings season," he wrote in a note to clients. The major averages tumbled on Monday , although by the final hour of trading had recovered the majority of their losses. Stocks made a sharp turnaround in time for the close, with the Dow closing nearly 100 points higher after falling 1,115 points. The S & P and Nasdaq Composite also clawed their way into positive territory, closing about 0.3% and 0.6% higher, respectively. The selling earlier in the session came as investors dumped equities in favor of less-risky assets in a rising-rate environment and ahead of a key Federal Reserve meeting this week. Despite inflation across the economy, Kolanovic said corporate earnings should still be strong, supported by solid margins. "While some are concerned that rising input prices will eat into margins, we expect margins to remain resilient thanks to strong activity and prices outpacing wage inflation," he said. The S & P 500 is coming off its worst week since the pandemic took hold in March 2020. JPMorgan said the market is approaching oversold territory and with sentiment turning bearish "we could be in the final stages of this correction." The Nasdaq Composite fell into correction territory last week. "While the market struggles to digest the rotation forced on it by rising rates, we expect the earnings season to reassure, and in a worst case scenario could see a return of the 'Fed put,'" he said. — CNBC's Michael Bloom contributed reporting.
Traders work on the floor of the New York Stock Exchange (NYSE) on January 18, 2022 in New York City.
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