Stocks fell on a broad front Thursday following a meager stimulus plan announced by the European Central Bank (ECB). The Dow Jones Industrial Average and S&P 500 were each hit with a 1.4% loss and the Nasdaq fell 1.7%. The Stoxx Europe 600 lost 3.1%, the biggest hit since Aug. 24.
In a Congressional testimony, Federal Reserve Chair Janet Yellen reiterated her position on no further stimulus on this side of the pond and hinted that interest rates would likely be hiked at the December FOMC meeting.
All 10 sectors of the S&P 500 fell with energy, off 2%, and health care, down 2.2%, leading. The iShares NASDAQ Biotechnology Index (ETF) (IBB) was pummeled with a 3.6% loss. The strongest sector of the day was semiconductors, but even the PHLX Semiconductor fell 0.6%.
Gold gained 0.7% to $1061.20 an ounce, and oil was up 2.9% to $41.08 a barrel. And the U.S. dollar fell 0.7% against the euro, which ended at 1.0933.
At Thursday’s close, the Dow Jones Industrial Average fell 252 points to 17,478, the S&P 500 lost 30 points at 2,050, the Nasdaq dropped 86 points to 5,038, and the Russell 2000 fell 21 points to 1,171.
The NYSE Composite’s primary exchange traded 990 million shares with total volume of 4.3 billion. The Nasdaq crossed over 2 billion shares. On the Big Board, decliners outpaced advancers by 4.2-to-1, and on the Nasdaq, decliners led by 3.2-to-1.
The double-top in SPDR S&P MidCap 400 ETF (MDY) that I noted in the Nov. 30 Daily Market Outlook has thwarted what seemed to be an unstoppable charge to new highs.
A very narrow trading range from the 50-day moving average at $260.65 to the double-top at just below the 200-day moving average at $269.73 appears to have held up a promising advance. Downside volume has been above average in the past two days, and MACD flashed a clear sell signal.
Like MDY, the iShares Russell 2000 Index (ETF) (IWM) is in trouble. It has clearly turned down from the resistance line at $121, as well as the important 200-day moving average at $120.63.
The next support is at the 50-day moving average at $115.37, and then the line at $114. But also like MDY, it received a sell signal from MACD, along with increased selling volume — not a good combination.
In addition to a sell signal from the broad-based S&P 500 (see Wednesday’s Daily Market Outlook), the drivers of the market for the first six months have faltered. MDY and IWM have failed to penetrate major resistance, and if they crack the support lines and averages, which are immediately below Thursday’s prices, will go to at least a sideways trend.
That trend, if established, will probably delay any further advance into next year with the added danger of the trend turning down since most fundamental analysts look for very little changes in projected earnings.
A Santa rally has occurred in the two weeks following Christmas for every year but three in almost two decades. The rally usually results from reports of higher holiday sales, but thus far, the malls have been reporting low traffic.
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.