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Stocks Plunge on Currency Woes; VIX Adds 32%

By: Schaeffer's Investment Research
Posted: 1/24/2014 4:24:00 PM
Referenced Stocks: BAC;EMC;GE;MSFT;ZNGA

"The headlines may tell you that a slowdown in China was the driver for the market's biggest drop since June," noted Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. "I'm not totally buying that, but whatever the true reason -- China, emerging market currencies, weak U.S. economic data, a blah earnings season so far, or simply it is time for a break -- the bears took charge today in a big way." The Dow Jones Industrial Average (DJI) moved sharply lower, losing its grip on the psychologically significant 16,000 mark and turning in a weekly loss of 3.5%.

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

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The Dow Jones Industrial Average (DJI - 15,879.11) suffered a triple-digit decline for the second day in a row, bringing an end to its worst week since May 2012. By the time the closing bell mercifully sounded, the blue-chip index was at its intraday low, down 318.2 points, or nearly 2%, closing south of 16,000 for the first time since Dec. 17. Week-over-week, the Dow dropped 3.5%. Just three Dow components managed to move higher on the day, including Microsoft Corporation ( MSFT ), which added 2.1%. General Electric Company ( GE ) brought up the rear, shedding 3.4%.

Things weren't much better for the S&P 500 Index (SPX - 1,790.29) which ended below the 1,800 mark for the first time since Dec. 17. On the day, the SPX logged a drop of 38.2 points, or 2.1%. The Nasdaq Composite (COMP - 4,128.17) shed 90.7 points, or 2.2%. The SPX lost 2.6% for the week, while the COMP surrendered 1.7%.

The CBOE Volatility Index (VIX - 18.14) spiked 4.4 points, or 31.7%, to settle at its highest level since Oct. 15. This week, the market's fear barometer added a whopping 45.8%.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"Sure this week was ugly, and will go down as one of the worst weeks in a long time," Detrick said. "The one 'positive' for the bulls is the SPX is now down two weeks in a row. It hasn't been lower three weeks in a row for 88 straight weeks. Going back 40 years, this record is second only to 107 weeks that ended back in 1996. In other words, the bulls have consistently stepped up in this situation, and the last week of January is historically rather bullish. The bottom line is: we could get a much better feel for this sell-off after next week is in the books."

5 Items on Our Radar Today :

  1. Much of today's sell-off was attributed to a drop in emerging market assets , as tapering worries emerged ahead of next week's Fed meeting. Local currencies in Turkey and Argentina took notable beatings, as did the Indian rupee. (CNBC)
  2. The Procter & Gamble Company (PG) announced a slight pullback in fiscal second-quarter earnings, but the figure still managed to top analysts' expectations. Revenue, however, fell slightly short of the mark . Fellow Dow component Microsoft Corporation ( MSFT ) announced sales and earnings per share that exceeded the Street's estimate , amid strong performance in the Xbox division. (Associated Press via ABC News; Yahoo! Finance)
  3. Google Inc (GOOG) scored a $220 price-target hike ahead of today's open.
  4. A large-scale put seller bet on intermediate-term support for Ford Motor Company (F) shares.
  5. Options speculators targeted both sides of the fence in Zynga Inc ( ZNGA ) today, with one group of traders betting on a near-term bounce.

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 :

Crude futures slumped on the day, but gained ground on the week. In today's session, the March contract gave back 68 cents, or 0.7%, to settle at $96.64 per barrel. Week-over-week, the commodity rose 2.4% when comparing most-active contracts.

Gold futures edged higher on the day, as investors sought out "safe havens" amid foundering equities. February-dated gold added $2, or 0.2%, to close at $1,264.30 an ounce. The precious metal gained ground for the fifth week in a row, rising roughly 1%.

SCHAEFFER'S MARKET POSTURE