The Dow Jones Industrial Average took a big hit in the stock market today, at one point falling more than 500 points (more than 1.5%) and hitting a session low of 32,916. Despite a little bit of a bounce in the dying minutes of the regular session, the blue-chip index closed with a 1.3% loss at 33,002, sinking slightly into negative territory for the year, down roughly 0.4%, for the year.
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Other averages fared worse as the cost of borrowing money jumped again in U.S. financial markets.
As the yield on the key Treasury 10-year bond surged 11 basis points to 4.80%, a 16-year high, the Nasdaq composite slumped as much as 2.2%. It failed to rebound vigorously. The tech-weighted index might make a new test of support at 13,000. On Tuesday, the composite hit a session low of 13,008 before finishing at 13,059, off 1.9%.
The S&P 500 fell 1.5%, only a little better than the nearly 2% walloping of the small-cap Russell 2000.
Some sector indexes also fared badly. The Dow transportation average was down less than the major indexes, yet still dropped nearly 0.9%. At 14,671, the Dow transports sliced through its 200-day moving average and trimmed its year-to-date gain to 9.4%. One of the year’s best transportation stocks, FedEx (FDX), backtracked 1.8% lower but remains near its 50-day line at 260.21.
FDX has been building a new flat base that presents a potential entry point at 270.95. FedEx’s 95 Relative Strength Rating is impressive.
Breadth was terrible in the stock market: Losers exceeded winners by more than a 5-1 margin on the NYSE. On the Nasdaq, declining stocks topped gainers 3,359 vs. 966, according to early data on Thinkorswim. With the IBD outlook still at “market in correction,” investors should be raising more cash and waiting on the sidelines for better market conditions to emerge.
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Dow Jones Falls As Volume Rises
Financial companies slid hard. Financial Select Sector SPDR ETF (XLF) fell 1.6% and hit a new four-month low. But the equally interest rate-sensitive Dow Jones utility average reversed off its intraday low to rebound 0.9% to 790.46. The sector index has fallen as much as 14% after losing a battle of upside resistance at its falling 50-day moving average near 902 two weeks ago. On Tuesday, the Dow utilities dropped as much as 2.2% intraday.
Volume increased more than 3% higher vs. Monday on the Nasdaq as well as the NYSE, according to MarketSmith.
The persistent rise in the cost of borrowing appears to be weighing heavily on Wall Street. Higher interest rates make it more expensive for corporations to borrow funds to enact new stock buybacks or increase dividends to shareholders. Also, mergers and acquisitions become more pricey.
Also, the higher returns now being offered for fixed-income instruments, particularly among lower-risk or so-called risk-free Treasury assets, tarnish the attractiveness of equities.
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House Speaker Kevin McCarthy is facing a test of his survival as the leader of House Republicans. McCarthy lost an initial referendum to table or kill a Rep. Matt Gaetz-initiated motion to vacate the speaker position. Voting began Tuesday afternoon at around 2 p.m. ET.
The Wall Street Journal reported that Democratic leaders in the House had recommended colleagues to vote against saving McCarthy. Just before 3 p.m., the Wall Street Journal also reported that the failure to block an effort by dissident Republicans to oust him puts his congressional leadership position in peril.
Within the Dow Jones industrials, at least 10 of the 30 components fell 2 points or more. Those included Goldman Sachs (GS), which is slated to report third-quarter results on Oct. 17.
Goldman Sachs, down 4% to 305.77 in above-average volume, has fallen further below its 50-day moving average and long-term 200-day line. It is on pace for its worst day since January.
Amid the apparent weakness, IBD chart analysis suggests now is not a good time to sell shares short when a stock has already fallen sharply below those key technical levels. Short-selling ideas and timing rules got considerable airtime during Tuesday’s “IBD Live” show.
Goldman Sachs shows a poor Earnings Per Share Rating of 46 on a scale of 1 to 99. Its Relative Strength Rating of 53 means GS is outperforming only 53% of all companies in the IBD database over the past 12 months.
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AmEx Stock
Fellow Dow Jones component American Express (AXP) dropped 3% to 145. Volume was running 13% above usual levels. The charge card and financial services giant is now almost 11% below its own 200-day moving average.
Looking at the daily chart, an ideal time to have sold shares of AXP short arrived on Sept. 18, when the stock, after rallying for six straight sessions, failed to hold above its 50-day line. AmEx holds an even worse 40 Relative Strength Rating.
Boeing (BA) rose 0.9%. But the fellow Dow Jones stock has climbed only three times out of the past 23 sessions, including Tuesday’s action.
The aerospace giant has fallen into the red for the year after rising as much as 28% since the first trading day of 2023. Analysts surveyed by FactSet see Boeing losing $3.64 a share this year but then returning to strong profitability next year, with earnings of $5.02 a share.
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