Stocks slipped Tuesday after putting in their strongest week of the year as investors headed for safer pastures.
Commodities seemed to bear the brunt of the selling, as oil plummeted 4.9% to $46.60 a barrel. That is, of course, with the exception of precious metals. Gold, for instance, gained 1.5% at $1,356.40 an ounce.
Buyers also flocked to bonds, which resulted in the yield on the benchmark U.S. 10-year Treasury note closing below 1.4% for the first time ever.
Some analysts chalked the risk-off approach up to renewed uncertainties regarding the Brexit vote. The U.K.’s exit could put more pressure on the already strained European banking system, with Italy being of chief concern.
The pound hit a 31-year low against the U.S. dollar, and European banks led U.S. banks lower. Barclays PLC (ADR) (NYSE:BCS) fell 5.1%, JPMorgan Chase & Co. (NYSE:JPM) lost 2.8% and Citigroup Inc (NYSE:C) dropped 3.3%.
At Tuesday’s close, the Dow Jones Industrial Average fell 109 points to 17,841, the S&P 500 lost 14 points at 2,089, the Nasdaq was off 40 points at 4,823, and the Russell 2000 dropped 17 points to 1,139.
The NYSE Composite’s primary exchange traded 982 million shares with a total volume of 3.6 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board and Nasdaq, decliners outpaced advancers by 2.7-to-1. Block trades on the NYSE increased to 5,367 from 4,943 on Friday.
The S&P 500 broke down through its support line at 2,100 with a 2.91 gap down at the open. The index fell from a resistance line drawn from the June high at 2,120. While it didn’t violate its 50-day moving average at 2,076, a down gap from a high usually picks up momentum as fear spreads.
But MACD is positive and volume is lower than average — both supportive of the bulls.
Conclusion
After the S&P 500’s nearly 6% rally off the June 27 low, some nervous profit-taking is to be expected. The key line to watch will be the 50-day moving average, currently at 2,076.59. A close below it would encourage more selling, and the next support is the much-discussed line at 2,040.
Continue to buy precious metals and related stocks (like this Trade of the Day pick), and sell into rallies until the current pattern is resolved.
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.
