Stock Market Today: Cracks Show as Stocks Teeter

U.S. equities started off higher on Tuesday, but it was a painful finish in the stock market today.

The SPDR S&P 500 ETF (NYSEARCA:SPY) fell 1.2%, the SPDR Dow Jones Industrial Average (NYSEARCA:DIA) slipped 1.3% and the PowerShares QQQ ETF (NASDAQ:QQQ) fell 82 basis points.

However, the Russell 2000 performed much worse, with the iShares Russell 2000 ETF (NYSEARCA:IWM) falling 1.9% on the day. It’s not too surprising to InvestorPlace readers as we outlined the concern in small-cap stocks just a few days ago.

The Fourth Quarter Starts on the Wrong Foot

Tuesday, Oct. 1 marked the first day of the fourth quarter, and it wasn’t a very good one. While last year we entered Q4 2018 near the highs — somewhat similar to this year — it doesn’t mean 2019 will play out just like 2018.

For starters, we have a dovish rate-cutting Federal Reserve right now against a hawkish rake-hiking Fed from last year. With low interest rates and decent earnings, that should keep a bid under the market.

However, it doesn’t help that we continue to have trade war headline risks, while a coming recession in Europe wouldn’t be a surprise given the economic data. The recent U.S. economic data wasn’t so hot, either.

The Institute for Supply Management’s September manufacturing purchasing managers’ index dropped to 47.8% on Tuesday. That’s down from last month’s reading of 49.1% and missed expectations of 50%. Worth pointing out is that sub-50% signals a recession in the manufacturing sector and with two consecutive readings below that mark, investors are feeling jittery.

SPY stock market today
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Source: Chart courtesy of

When it comes to the SPY ETF, we can see Tuesday’s action puts stock back in an important area.

The SPY is  currently sitting right on its 50-day moving average and former resistance through the month of August. Below opens the SPY up to a decline down to $287.50. There it will find uptrend support (blue line) and the 78.6% retracement. Below it, and August range support near $282 and the 200-day moving average are possible.

If current support holds, look to see if the SPY can reclaim the 20-day moving average, and the Fed-day low at $298.25. If it can, that puts $300+ back on the table.

Free Commissions?

Charles Schwab (NYSE:SCHW) announced that it will bring commission-free trading to retail investors. That’s obviously a big win for investors and traders, as they can remove an expense from their total returns. However, it’s a concerning move for SCHW and its margins.

As such, shares tumbled 9.7% on the day, but they fared much better than some of the competition.

E*Trade (NASDAQ:ETFC) crashed 16.4% and TD Ameritrade (NASDAQ:AMTD) crumbled 25.8%. Interactive Brokers (IEX:IBKR) sank almost 10% as well, despite sending a similar ripple through the market last week.

AMTD and SCHW were two of InvestorPlace’s five Top Stock Trades on Tuesday.

Movers in the Stock Market Today

U.S. Steel (NYSE:X) rallied 3.3% after the company announced it will buy a minority 49.9% stake in Big River Steel. The company also has the option to buy the remaining 51.1% stake by 2023.

McCormick (NYSE:MKC) reported third-quarter earnings before the open, rallying 6.8% as a result. Earnings of $1.46 per share beat estimates by 17 cents per share, while revenue of $1.3 billion missed expectations by $10 million and grew 80 basis points year-over-year. Stronger-than-expected guidance caused investors to bid up the stock.

Heard on the Street

A day after a big acquisition, Blackstone (NYSE:BX) was initiated with a new “outperform” rating at Wells Fargo. The analyst is using a $60 price target, implying over 27% upside to the stock price. Despite the call, shares fell more than 3.5% on the day.

VMWare (NASDAQ:VMW) was also upgraded to “outperform” at Wells Fargo, as analysts assigned a $180 price target. The target implies almost 17% upside despite the stock rallying about 2.5% on the day.

NXP Semiconductors (NASDAQ:NXPI) caught an upgrade to outperform at KeyBanc, while analysts set to a $130 price target. The target implies almost 20% upside, while NXPI was mostly flat on the day.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.

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