Stocks Spiral Lower as Fed Fails to Surprise

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"The Fed's interest-rate decision got the headlines, but the market was firmly in the red before the news even came out," observed Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. "With the European Central Bank still on tap for tomorrow and the monthly jobs number due Friday, it seemed like today was a good day for some traders to book profits." The Dow Jones Industrial Average (DJI) headed lower out of the gate and continued to sink as the day progressed, ultimately closing off 139 points.

Continue reading for more on today's market, including :

plus...
  • The market takes a tumble, the Fed holds pat, and the bulls line up ahead of LinkedIn ( LNKD ) earnings.

The bulls were banished to the sidelines today, as the Dow Jones Industrial Average (DJI) settled just off its intraday low. At the closing bell, the blue-chip index was off 139 points, or 0.9%, at 14,700.95, just above its 10-day moving average. Just five Dow components ended the session in positive territory. Leading the advancing minority was Walt Disney ( DIS ), which gained 0.6%. Bringing up the rear were Verizon Communications ( VZ ) and Merck (MRK), both of which dropped 2.8%.

The S&P 500 Index (SPX) was also sharply in the red, shedding 14.9 points, or 0.9%, to 1,582.70, to end atop support at the 1,575 level. The technology sector struggled as well, as the Nasdaq Composite (COMP) gave back 29.7 points, or 0.9%, to close at 3,299.13 after tagging another new 12-year peak of 3,330.02 shortly after the open.

It was a strong day for the CBOE Market Volatility Index (VIX), which surged 1 point, or 7.2%, to settle the session at $14.49. This put the index back atop its 10-day moving average for the first time since April 19.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"Small-cap stocks were crushed today, down more than 2%," noted Detrick. "Remember that the Russell 2000 Index (RUT) never made a new high like its peers, and now it is down 3% from its March 15 peak of $954. This isn't a huge sell signal, but potentially a warning."

3 Things to Know About Today's Market :

  • As widely expected, the Federal Open Market Committee elected to leave interest rates unchanged, and keep its $85-billion-per-month bond buyback program in place. The one wild card in the statement was the declaration that future asset purchases could be determined by labor-market changes or inflation. (CNBC)
  • ADP reported that hiring in the private sector expanded by just 119,000 in April. This reading, which was well south of expectations, was the lowest since last September. (Los Angeles Times)
  • Ford Motor (F) reported an 18% jump in vehicle sales for April , while Chrysler and General Motors (GM) each saw sales rise 11% last month. The top-selling car model for Ford was the Fusion, while GM saw notable strength in the Cadillac line. (USA Today)

5 Stocks We Were Watching Today :

  1. Fans of LinkedIn Corp ( LNKD ) expect the stock to enjoy another post-earnings rally .
  2. Short-term bears see Apple Inc. (AAPL) heading back below the $400 level .
  3. Amazon.com (AMZN) bears used weekly options to place short-term bets.
  4. Call buyers bet big on a sharp move higher in Micron Technology (MU) shares.
  5. The long-term picture for Advanced Micro Devices (AMD) looks bleak , according to one large-scale put buyer.

EARNINGS

For a look at today's options movers and commodities activity, head to page 2.

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Commodities :

Oil futures were in the red again today, driven south by discouraging economic reports out of the U.S. and China. Adding insult to injury, supplies grew by more than expected during the past week. By the close, June crude futures were sitting at $91.03 per barrel, down $2.43, or 2.6%, on the day.

June-dated gold also fell, settling at $1,446.20 an ounce, down $25.90, or 1.8% -- a one-week low for the contract. The precious metal weakened against a backdrop of slumping payroll additions and ahead of the Fed statement.

SCHAEFFER'S MARKET POSTURE



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.


This article appears in: Investing , Options

Referenced Stocks: DIS , FB , LNKD , STI , VZ

Schaeffer's Investment Research

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