The Dow Jones Industrial Average closed up 0.7% Tuesday following a volatile session that started higher and then dropped steadily until early afternoon. But the blue-chip index executed an intraday reversal and spiked 194 points from its low to the close.
The S&P 500 gained 0.8%, the Nasdaq rose 1%, and the Russell 2000 brought up the rear with a 0.3% advance.
Oil also reversed after making a new low under $30 — for the first time since 2003 — on news of a terrorist attack in Turkey. Crude closed the day at $30.44 a barrel, down 3.1%. Major decliners included Williams Companies Inc (WMB), off 11.5%, and Southwestern Energy Company (SWNC), down 8.5%.
Financial services led the way higher, up 2%, followed by a 1.3% advance in health care, a 1.2% rise in technology and a 1.1% advance in consumer discretionary stocks.
The leaders in the technology sector were Alphabet Inc (GOOGL, GOOG), Facebook Inc (FB) and Apple Inc. (AAPL), each up more than 1.5%.
Real estate and utilities were the worst performers, off 1.9% and 0.4%, respectively.
Gold fell 1% to $1,085.60 an ounce, and U.S. dollar was flat against the euro but down against the yen.
At Tuesday’s close, the Dow Jones Industrial Average gained 118 points at 16,516, the S&P 500 rose 15 points to 1,939, the Nasdaq gained 48 points at 4,686, and the Russell 2000 was up 3 points at 1,045.
The NYSE Composite’s primary exchange traded 1.2 billion shares with total volume of 4.9 billion. The Nasdaq crossed 2.1 billion shares. On the Big Board, decliners outpaced advancers by 1.1-to-1, and on the Nasdaq, they were even. Block trades on the NYSE increased to 6,406, up from 5,955 on Monday.
The S&P 500 bounced Tuesday, as expected, with higher-than-average buying for the second consecutive day. But it came perilously close to breaking the support line at 1,885. Tuesday’s intraday reversal may hold for a few days since the oversold condition is still in place.
Conclusion
Even with a high-volatility bounce, which usually signals a temporary bottom, the S&P 500 is still down 5.2% this year. And it, along with the other major indices, has flashed signs of a move lower.
But before the next challenge to the August low, I anticipate a Fibonacci bounce of 50% resulting from an oversold condition. This could take the S&P 500 to the resistance line at 1,990 since the exact calculation results in a target of 1,992.
Traders should react to Tuesday’s action by selling as the index nears the resistance line. Investors should continue to employ protective options strategies since the outlook is bearish.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
