A strong opening Wednesday turned sour as stocks fell for the third day on a broad front. The Dow Jones Industrial Average was up as much as 200 points before closing down 0.4%. The S&P 500 lost 0.8% for the day after being up as much, and the Nasdaq closed down 1.5%.
Crude initially jumped, but then reversed on a report from the U.S. Energy Information Administration that indicated that although oil inventories fell last week, inventories of distillates like heating oil and diesel rose more than expected. Crude traded near seven-year lows again, losing 0.9% at $37.16 a barrel.
Early gains were the result of merger talks between Dow Chemical Co (DOW) and E I Du Pont De Nemours And Co (DD). Both stocks advanced close to 12%, but lower oil prices ultimately overshadowed the impact of a possible deal.
Lululemon Athletica inc. (LULU) fell 13.1% after the athletic apparel maker missed third-quarter earnings estimates and lowered its full-year outlook. Costco Wholesale Corporation (COST) lost 5.4% after reporting a decline in earnings and a slowdown in membership growth.
Yahoo! Inc. (YHOO) dropped 1.3% after announcing it was not planning to spin off its position in Alibaba Group Holding Ltd (BABA).
The euro gained 1.1% against the U.S. dollar at $1.1006. And the 10-year Treasury note rose in price, sending its yield down to 2.21% from 2.24% on Tuesday.
At Wednesday’s close, the Dow Jones Industrial Average was off 76 points at 17,492, the S&P 500 fell 16 points to 2,048, the Nasdaq lost 75 points at 5,023, and the Russell 2000 was down 14 points at 1,146.
The NYSE Composite’s primary market traded over 1 billion shares with total volume of 4.3 billion shares. The Nasdaq crossed almost 2 billion shares. On the Big Board, decliners outpaced advancers by 1.5-to-1, and on the Nasdaq, decliners led by 2.2-to-1. On the NYSE, block trades declined to 5,588 versus 5,829 on Tuesday.
It was a wild day of trading with above-average volume resulting from a broad decline. Just after the opening, the S&P 500 challenged the resistance line at 2,080, only to reverse and close under its 200-day moving average at 2,064 and its 50-day moving average at 2,052.
This puts pressure on the index to hold above its next inflection point, the support line at 2,020.
Conclusion
The reversal in the S&P 500 sparked by lower commodity prices also had a negative impact on the Dow Jones Industrial Average. The Dow smashed through its 200-day moving average and turned down from a double-top. Volume was not as negative as on the S&P 500, but an intraday reversal at the current high levels in the two major indices is a very negative occurrence.
Needless to say, we will hold any cash generated from sales as stocks approached their highs and wait for this end-of-year volatility to provide a better buying opportunity. High volatility at major tops usually, but not always, results in lower prices. As my dad would say, “It isn’t broken, but it sure is badly bent.”
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.
