The Dow Jones Industrial Average led a broad-based sell-off Friday, plunging 1.2%. It was the worst weekly decline for the Dow since late August with the blue-chip index losing 3.7% and breaking a six-week winning streak.
Disappointing economic data and earnings sparked the selling. The Wall Street Journal also reported global markets were under pressure as investors prepared for the Federal Reserve to raise interest rates in December. Currently, 92% of business and academic economists polled by The Wall Street Journal expect the Fed to raise rates at its December meeting.
Friday’s decline was led by the consumer discretionary sector (-2.6%) and technology (-2%).
The retail sector plummeted 3.8%. A Commerce Department report showed that despite some deep discounting, retail sales rose 0.1% in October from the prior month versus an expected 0.3%. And September retail sales were revised to flat from a previous 0.1% increase.
Some of the hardest hit stocks in the sector included Nordstrom, Inc. (JWN), off 15%, Fossil Group Inc (FOSL), down 36.5%, and J C Penney Company Inc (JCP), off 15.4%.
In the technology sector, Apple Inc. (AAPL) fell 2.9% and Alphabet Inc (GOOGL, GOOG) was down 2.2%. Cisco Systems, Inc. (CSCO) was off 5.8% despite reporting a strong third quarter after management provided guidance that was below the consensus.
Crude oil for December delivery fell 2.4% to $40.74 a barrel. Gold fell slightly to $1,080.90 an ounce. And the 10-year Treasury note rose in price as its yield fell 4 basis points to 2.28%. The euro lost 0.4% against the U.S. dollar at $1.0774.
At Friday’s close, the Dow Jones Industrial Average was down 203 points at 17,245, the S&P 500 fell 23 points to 2,023, the Nasdaq lost 77 points at 4,928, and the Russell 2000 was off 8 points at 1,147.
The NYSE Composite’s primary exchange traded 947 million shares with total volume of 4.2 billion. The Nasdaq crossed 2 billion shares. On the Big Board, decliners outpaced advancers by 1.6-to-1, and on the Nasdaq, decliners led by 1.7-to-1. Block trades on the NYSE rose to 5,749 from 5,399 on Thursday.
For the week, the Dow fell 3.7%, the S&P 500 lost 3.6%, the Nasdaq was down 4.3% and the Russell 2000 lost 4.4%.
The S&P 500 fell through its 200-day moving average on Thursday with negative volume of 9-to-1. The sell-off continued Friday as the index plunged to a close of 2,023 for a 38.2% Fibonacci retracement of the September closing low of 1,882 to the November closing high of 2,110.
Conclusion
It all comes down to earnings, and earnings — especially earnings guidance — have been lousy. In other words, there are fundamental reasons for Friday’s plunge.
Where will the sell-off stop? No one knows, of course. Because of the horrific bombings in Paris, the final half hour of trading had an emotional basis. And emotional sell-offs have a tendency to make minor reversals.
The S&P 500 closed exactly on the 38.2% Fibonacci retracement. Thus, we may, and I stress “may,” see a bounce today. If that occurs, traders should sell into it.
Since prior Fibonacci numbers have terminated with retracements of about 60%, my guess is that this sell-off will bottom at about 1,974. If not, we may be facing a nasty bear cub carrying a correction or even a bull in its teeth.
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.
