Stocks ended a five-day rally on Tuesday following troubling economic data from China and falling crude prices. China reported the biggest drop in exports in more than five years, and imports fell as well. And WTI oil declined 3.7% to $36.50 a barrel.
The Dow Jones Industrial Average fell 0.6%, the S&P 500 lost 1.1%, the Nasdaq dropped 1.3% and the Russell 2000 was hit with a 2.4% loss.
The biggest losers on the S&P 500 were Chesapeake Energy Corporation (CHK), Southwestern Energy Company (SWN) and Murphy Oil Corporation (MUR), each off roughly 15% to 18%. Other notable decliners included Anadarko Petroleum Corporation (APC), down 8.8%, and blue chips Chevron Corporation (CVX) and Exxon Mobil Corporation (XOM), both off more than 2%.
After energy stocks, down 4.2% as a group, the worst-performing sectors were materials, off 2%, and financials, off 1.6%.
The losses in materials were due to falling prices for base metals, as China accounts for roughly half of the world’s consumption of these metals. In particular, copper fell 2.7%.
Bank stocks took a hit on concerns over their financing relationship with energy companies.
Biotech stocks continued to show weakness with the iShares NASDAQ Biotechnology Index (ETF) (IBB) losing 3.6% on Tuesday. The ETF has fallen 23% since the beginning of the year.
Gold lost 0.1% Tuesday, closing at $1,262.90 an ounce. The euro fell 0.1% against the U.S. dollar to $1.1006. And the yield on the 10-year Treasury note fell to 1.83%, down from 1.91% on Monday, as bonds rose.
After appearing to break into the important band of resistance from 1,990 to 2,020, the S&P 500 reversed course on Tuesday. By failing to hold within the band, the index gave up an attempt to successfully penetrate the 200-day moving average at 2,022. MACD is overbought and flat volume on the buy side is disappointing.
The S&P 500 can still reverse up again, but Tuesday’s performance was not encouraging for the bulls. A strong, upward intermediate-term run appears to have been foiled with the index closing near the low of the day. The near-term overbought condition looks like it is being resolved by lower energy prices when the focus of an advance should be on earnings.
And speaking of earnings, with the S&P 500 trading for 23.1 times trailing 12-month earnings compared with 20.5 a year ago, Q1 earnings had better pick up or a rejuvenated bear will be chasing a tired bull again.
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.