Stocks opened higher on Wednesday, as momentum from Tuesday's
late buying spree carried over to the financial and technology
stocks. After just an hour of trading, the Dow Industrials had
gained more than 125 points, with a 50-point gap up on the opening,
) was up almost 5%.
But, as the day wore on, it became apparent that enthusiasm from
Tuesday's bargain hunting could not replace the fear of a chaotic
European debt situation. After several retreats and then rallies,
stocks finally gave way to broad selling that took the
Dow Jones Industrial Average
) to a break-even at 3:30 p.m., and a minus by the close.
The weakness was blamed primarily on a collapsing euro, which
settled under 1.22 versus the U.S. dollar, which is just above its
four-year low. The euro's decline was blamed on European leaders'
failure to take strong, decisive steps to control a spread of the
Financial stocks initially led the broad market lower, but by
the close, it was the telecom group that had the biggest loss, off
1.2%, which resulted from a 1.7% slide in
Verizon Communications Inc.
) after its CEO said that the FCC's proposal to more heavily
regulate the Internet could "be dangerous to the overall health of
But late selling could also have resulted from the S&P's
inability to hold above 1,090 -- a benchmark that some technicians
have referred to as a major support line. So, when it became
obvious that the line was about to be penetrated, additional
sellers accelerated the decline until the closing bell halted
Despite relatively high volume and broad selling, some large-cap
stocks made gains.
The Boeing Company
) rose 0.8%, Caterpillar Inc. (NYSE:
) gained 0.9%,
The Walt Disney Company
) rose 0.75%, and
) was up 0.55%.
Treasury prices fell raising the yield of the 10-year note to
At the close, the Dow was down 69 points to 9,974, the S&P
500 was off 6 points to 1,068, and the
) fell 15 points to 2,196.
The NYSE traded 1.9 billion shares with decliners ahead of
advancers by 3-to-2. The Nasdaq traded 1.1 billion shares, but
advancers were ahead there by 5-to-4.
July crude oil rose $2.76 to $71.51 a barrel on a more
optimistic view of the world's economic outlook by futures traders.
Energy Select Sector SPDR
) fell 11 cents, closing at $51.87.
June gold settled at $1,213.40 an ounce, up $15.40, and the
PHLX Gold/Silver Sector Index
) fell 46 cents to $170.74.
What the Markets Are Saying
The last half hour of selling was attributed to a "failure of
the S&P 500's inability to sustain a break above the 1,090
level," according to the Wall Street Journal. That's really
reaching for it since, on Tuesday, the S&P closed at 1,074.
What is more likely is that the news from Europe triggered selling
that put the February closing lows of the Dow Industrials under the
psychologically important 10,000 line, with the next support at
9,908, just 66 points to the south.
So, even with the disappointing failure of the key indices to
hold onto the early morning's gains, none of them has broken the
crucial February closing lows. And there is another very important
number that many have ignored, and that is the S&P 500's bottom
at 1,044. The 1,044 support line matches the October 14, 2008,
intraday high, and as Michael Ashbaugh correctly pointed out, this
line, along with other important support zones, has yet to be
Here is his analysis: "The S&P 500 held major support at
1,044. The Russell 2000 survived a test of its 200-day moving
average … The S&P MidCap 400 has also rallied from its 200-day
moving average … For as long as these areas hold, the
corrective-bounce, market-recovery advocates have a legitimate
However, the "correction" is now reaching a critical point where
the bulls must take a stand or be faced with a massive
CBOE Volatility Index
) swung from under 25 to almost 35 yesterday, closing at 34.59,
giving us an indication that no matter how strongly we feel about
the bull or bear case, the markets will continue to gyrate, giving
traders one of their best opportunities in over a year to
capitalize on the swings while long-term investors keep popping
their purple pills.
Tomorrow we'll consider the condition of the sentiment
Today's Trading Landscape
Earnings to be reported before the opening
Big Lots, Bio-Reference Labs, Columbus McKinnon, Concord Medical
Services, Conns, Costco, Genesco, HH Gregg, HJ Heinz, Monro
Muffler, Movado Group and Tiffany & Co.
Earnings to be reported after the close include:
Adaptec, Blue Coat, Diamond Foods, Esterline Techs, Guess, J. Crew,
Novell, OmniVision, SeaChange and Terremark Worldwide.
Economic reports due:
GDP (the consensus expects 3.5%), jobless claims (the consensus
expects 450,000), corporate profits, EIA natural gas report, Fed
balance sheet and money supply.
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