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U.S. Stocks Follow China Lower; Dow Swallows 140-Point Loss
By: Schaeffer's Investment Research
Dow Jones Industrial Average (DJI)
was down nearly 250 points at its intraday nadir, but pared its
deficit to 140 points by the closing bell. "It was another volatile
day, as uncertainty about just exactly when the Fed will begin
tapering looms over this market," stated Schaeffer's Senior Equity
Analyst Joe Bell, CMT. "Treasury rates once again jumped, which has
suddenly become the norm during the month of June. China's stock
market also plummeted, which put a dark shadow over U.S. equities
as trading began."
Continue reading for more on today's market, including :
- Schaeffer's Senior Trading Analyst Bryan Sapp makes a case for support on Apple Inc. ( AAPL ) and projects a " near-term bottom " in the broader market.
- Schaeffer's contributor Adam Warner wonders if recent trends on the option-trading front could be a bullish contrarian sign.
- Sprint Nextel ( S ) holds a special meeting, Cisco Systems ( CSCO ) entertains investors, and other stocks to watch this week.
- Economic news from Dallas and Chicago, a big deal for Vodafone
), and increased bullish speculation on Herbalife Ltd. (
The Dow Jones Industrial Average (DJI - 14,659.56) was down nearly 250 points at one point in the session, but reduced its loss to 140 points, or 0.9%, by the bell. As such, the blue-chip barometer ended south of its 80-day moving average for the third straight day. Among the Dow's 30 components, Johnson & Johnson (JNJ) led the five gainers, tacking on 1.7%, while Bank of America (BAC) paced the 25 decliners with a drop of 3.1%.
The S&P 500 Index (SPX - 1,573.09) also shaved its deficit by the close, ending 19.3 points, or 1.2%, lower. At its intraday bottom, the SPX was down 32 points. Meanwhile, the Nasdaq Composite (COMP - 3,320.76) gave up 36.5 points, or 1.1%, after flirting with a 62-point loss around midday.
The CBOE Market Volatility Index (VIX - 20.11) rallied to its highest intraday point of the year, at 21.91, but trimmed its lead to 1.2 points, or 6.4%, by the time the dust settled. The market's "fear barometer" is on pace to end atop its 10-month and 20-month moving averages for the first time since November 2011.
A Trader's Take :
"The market actually finished well off its lows and received a little bid, which was much better than we experienced late last week," remarked Bell. "While most major sectors finished in the red, high-yielding dividend stocks like utilities and real estate investment trusts (REITs) outperformed."
3 Things to Know About Today's Market :
- Stocks in China dropped significantly -- and impacted other global markets -- after the People's Bank of China stated that liquidity is "overall at a reasonable level," signaling it would not be loosening its monetary policy anytime soon. Meanwhile, Goldman Sachs downwardly revised its economic outlook for China, citing "record tightening of the interbank market." As a result, the Shanghai Composite posted its worst single-day percentage drop in four years. (FOX News)
- The Bank of International Settlements (BIS) advised central banks around the globe to tighten the loose monetary policy -- such as historically low interest rates and other stimulus efforts -- that has been instituted in recent years. (CNBC)
- The Federal Reserve Bank of Dallas reported a business activity index of 6.5 this month, up from negative 10.5 in May. Positive numbers are indicative of expansion in the manufacturing sector. Elsewhere, the Chicago Fed's national activity index edged up to negative 0.30 in May from negative 0.52 in April. (Nasdaq, Bloomberg)
5 Stocks We Were Watching Today :
- In the wake of its big merger news, Vodafone Group ( VOD ) attracted back-month call sellers.
- Herbalife Ltd. ( HLF ) has seen increased call speculation over the past two weeks.
- American International Group (AIG) was targeted by front-month call buyers looking for a short-term pop higher.
- BMO lifted its price target for Apple Inc. ( AAPL ) , as the company introduced a new pay structure for its executives.
- Yahoo! Inc. (YHOO) option bulls placed long-term bets using in-the-money positions.
For a look at today's options movers and commodities activity, head to page 2.
After spending the first half of the session in the red, oil futures staged a comeback in afternoon trading. By the close, August-dated crude added $1.49, or 1.6%, to end at $95.18 per barrel.
Gold selling continued today, due in part to rising concerns about China's growth potential. The August-dated gold contract lost $14.90, or 1.2%, to settle at $1,277.10 per ounce.