Stocks fell for the third consecutive day with the S&P 500 dropping 1.5%. The Nasdaq suffered its biggest one-day loss since April 2014, off 2.4%.
The Nasdaq’s decline was led by biotech and technology stocks. The iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) fell 4.1% as investors sold higher P/E stocks in favor of lower P/E stocks in the energy sector. Crude oil gained 3.6% to $49.21 a barrel.
Concerns over a tech bubble drove the iShares PHLX SOX Semiconductor (NASDAQ:SOXX) down 4.9%. The Russell 2000, home of many small-cap technology stocks, fell 2.3%.
As stocks plummeted, investors sought safety in gold, which rose 0.5% to $1,197 an ounce. But another safety valve, U.S. Treasury bonds, fell, with the 10-year note’s yield rising to 1.92%. Investors fear the Federal Reserve will raise interest rates sooner than previously expected.
Durable goods orders fell by 1.4% in February versus a consensus expectation of a 0.3% increase. Aircraft orders fell 14% in February following a 68.1% increase in January.
At Wednesday’s close, the Dow Jones Industrial Average was off 293 points at 17,719, the S&P 500 fell 30 points to 2,061, the Nasdaq lost 118 points at 4,877, and the Russell 2000 was down 30 points at 1,234.
The NYSE’s primary market traded 791 million shares with total volume of 3.4 billion. The Nasdaq crossed 2.1 billion shares. On the Big Board, decliners outpaced advancers by 2.7-to-1, and on the Nasdaq, decliners were ahead by 4.2-to-1.
The widely followed S&P 500 index fell after failing to surmount its February high. In just three sessions, it has closed below the support zone at 2,064 to 2,093. More importantly, it has violated its 50-day moving average at 2,067 and the January highs at 2,064.
A similar violation was mirrored by the Dow Jones Industrial Average, which curiously also failed to punch to a new high and fell without threatening its prior high at 18,289.
In Tuesday’s Daily Market Outlook, I opined that the Dow Jones Transportation Average was approaching a moment of truth. On Wednesday, the transports, which are closely watched as an economic indicator, violated a crucial support line. Now the index has the even more important support at the triple-bottom at 8,584 and its 200-day moving average in its sights.
As readers are aware, I have voiced concern over the failure of the Dow Jones Transportation Average to confirm a new high in the industrials (see my Daily Market Outlooks from March 17 and March 24).
Wednesday’s overall decline with increasing volume raises the possibility that a serious correction is about to occur. Not only have the transports failed to confirm, but the key Dow Jones Industrial Average and S&P 500 indices have stalled before punching to new highs that were made in February. This failure has resulted in double-tops with the most recent top below the prior high — a negative technical indicator.
Can the recent technical difficulties be overcome? Yes, but buyers must emerge at the current level or these key indices will break through the next major support lines.
It is clearly time to sell your losers and high-P/E stocks and seek the safety of lower P/E stocks that sport high dividend yields or cash.
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.