Stocks took a beating on Tuesday, mostly as a result of the possibility that President Donald Trump’s plans will be stalled because of fellow Republicans’ lack of support for his healthcare plan, which would dismantle his predecessor’s Affordable Care Act.
A failure to pass a new healthcare plan would mean that other programs promised by the new administration would be subject to delay or failure, as well. Other uncertainties abound: A border tax seems shaky, income tax reform appears on soft ground and the recent rise in interest rates was predicated on a strong economy. The Federal Reserve’s projections resulted from the president’s new programs, and stocks have rallied due to enthusiasm over expectations of higher growth.
Financials, which include banks, were second hardest hit of the eleven sectors in the S&P 500. The sector fell 2.1% only to be exceeded by Materials, down 2.3%.
The dollar fell to its lowest level in more than four months. Measured against a basket of 16 currencies, the buck lost 0.4%.
At the close, the Dow Jones Industrial Average fell 238 points to 20,668, the S&P 500 lost 29 points at 2,344, the Nasdaq closed at 5,794, a loss of 108 points, and the Russell 2000 fell 38, closing at 1,347. The NYSE’s primary exchange traded 856 million shares with total volume of 4.2 billion shares, and the Nasdaq crossed over 2 billion shares. On the Big Board, decliners outpaced advancers by 3.8-to-1, and on the Nasdaq, decliners led by 5.2-to-1. Blocks on the NYSE increased to 7,804 from 6,235 on Monday.
The four-month-plus rally that began with the election of President Trump may end today. Technically, the Nasdaq Composite, which has driven much of the advance, executed an “Outside Reversal” yesterday, opening higher than Monday’s high and closing lower than Monday’s low. The close was especially noteworthy since it exceeded Monday’s intraday low by over 94 points and smashed support at the 20-day moving average at 5,861.
Conclusion: The major indices have broken near-term support. The Nasdaq’s next line of support is the trend line drawn from the November gap opening. That trend line provides support at just below Tuesday’s low. After that is the important 50-day moving average at 5,737 (blue line).
Will a more serious breakdown occur? Most bull markets have several declines of 10%-plus. The president has a history of turning defeat into victory. But the technical side of the market has raised a caution flag, indicating that a correction has begun.
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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