On Monday, the Dow Jones Industrial Average was down more than 100 points, falling under the coveted 20,000 line achieved last week. It was the largest decline since the presidential election and broad enough to include nine of the S&P 500’s eleven sectors.
The selling appears to have its roots in President Trump’s move to restrict immigration from seven countries with records of high incidence of terrorism. Airlines and technology stocks, as well as financials, were among the leading decliners. But since the election these groups were also among the leading groups.
The Dow Jones Industrial Average fell 0.6%, the S&P 500 fell 0.6%, and the Nasdaq dropped 0.8%. The Russell 2000 fell 1.3%. The S&P’s technology sector fell 0.8% and financials lost 0.7%
In addition to the immigration issue, other factors drove stocks lower: The Federal Reserve will release its latest policy statement on Wednesday with the possibility of an impending rate increase. The Fed could be focusing on Friday’s release of the January Employment Situation Report, which is forecast by Briefing.com at 170,000.
Crude oil (WTI) for March delivery fell 1% to $52.63 per barrel, and the dollar fell 0.3% against a basket of 16 other currencies.
At the close, the Dow Jones Industrial Average fell 123 points to close at 19,971, the S&P 500 lost 14 at 2,281, the Nasdaq closed at 5,614 for a loss of 47 points, and the Russell 2000 closed at 1,352, down 18 points. The NYSE’s primary exchange traded 873 million shares with total volume of 3.6 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 2.3-to-1, and on the Nasdaq, decliners led by 3.3-to-1. Blocks on the NYSE increased to 6,838 from 5,797 on Friday.
Although from different bases the two minor indices, the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) and the SPDR S&P Midcap 400 ETF (NYSEARCA:MDY), closed very close to their respective first line of support. The Russell 2000, being the more volatile of the two, drew more volume and closed below its 50-day moving average. The S&P drew only average selling and bounced nicely, closing on its 20-day moving average having held at the 50-day MA earlier in the day.
Conclusion: Both significant trading indices, the IWM and the MDY, have thus far held at their first support lines, both enduring what the pundits are saying is a test of the market’s true support. However, in my opinion, this minor sell-off results from two factors: profit-taking in advance of the Fed’s upcoming policy statement and a knee-jerk reaction to an outside force — the president’s immigration policy.
The real test comes later this week from quarterly earnings reports from some of the major Dow and S&P members. This year more emphasis will be placed on the earnings than on politics, and that’s the reason to buy or sell stocks.
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.
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