What goes up really can come down — at least for one day.
Stocks tumbled Wednesday, logging their biggest one-day decline of the year and for the time being reversing momentum in a market that had risen four of the last five sessions.
The Dow Jones Industrial Average lost only 12 points to 11,825, but only 8 of the 30 components were advancers. IBM (NYSE:IBM) ended up carrying the Dow’s water, rising 3.4% after a strong earnings report late Tuesday.
However, the S&P 500 fell 1% to 1282, while the Nasdaq dropped 1.5% to 2725.
For the S&P 500, it was a fight to the finish to see whether the index would close above its 10-day moving average (around 1280) for a record-setting 34th day in a row.
Although it did, a big part of 2011’s gains were given back on Wednesday: the S&P 500 is now up just 1.8% for the year (admittedly, this would extrapolate well over 52 weeks).
Despite the plethora of usual theories surrounding the market’s move, nothing seemed to make as much sense as the idea that this sort of selloff just hadn’t happened yet this year.
The recent parabolic rise in stocks had been well documented — the S&P had risen about 23% since early September — and it may be refreshing to some that even traders who have enjoyed the runup will occasionally need a reality check that what they’re paying for is worth it.
Financials took a large hit on Wednesday, in part due to the merely expectations-meeting earnings report before the opening bell by Goldman Sachs (NYSE:GS), historically a sort of Apple (NASDAQ:AAPL) of finance in regard to its usual beating-forecasts-badly nature.
The Financial Select Sector SPDR (NYSE:XLF) exchange-traded fund dropped 2.3%, but there, too, it’s helpful to remember it had just popped 3.3% from Tuesday to Friday of last week.
Similarly, materials stocks fell on weakness, for today anyway, on agricultural and steel stocks, which were outperformers on Tuesday. The Materials Select Sector SPDR (NYSE:XLB) ETF slipped 2.2% — it had jumped nearly 12% just since Nov. 26.
Bonds rallied to push the 10-year note yield to 3.34% — once again at a base it has refused to fall below in the past month.
For bulls, Wednesday’s market looked a lot like a consolidating move amid a rise that even they would possibly admit was a little overdone.
The rest of the week will show if the bears have more than one day of fight in them these days.
