The bears made it 3-in-a-row on Wednesday and stretched major support levels after another wasted day on Capitol Hill and not-so-rosy economic news.
Futures were pointing towards a slightly lower open but got worse before the bell after hearing Durable Goods Orders for June fell 2.1%. Wall Street was looking for a much lower decline of 0.1%. On the plus side, excluding transportation, Durable Goods Orders increased by 0.1% which was better than the 0.2% decrease that had been penciled-in.
Still, it wasn’t enough to keep the market from tanking as traders took a break from Tech after Juniper Networks (JNPR, $24.66, down $6.51) disappointed analysts with their numbers. The stock fell 20% and is at 2-year lows as demand for networking gear seems to have dried up.
Cisco Systems (CSCO, $15.69, down $0.60), which had been rallying coming into this week, fell nearly 4% in sympathy. Tech earnings have buttered the bulls’ bread this earnings season so this was a letdown but it could be sector specific.
As a result, the Nasdaq suffered the blunt of the bears blows and the major indexes fell 2%, on average, after posting their worst day in two months.
The Dow fell nearly 200 points, or 1.6%, and finished at 12,302. The index traded to a low of 12,289 and closed just under our 12,350 downside target. As we mentioned yesterday, there is still risk down to 12,200-12,000 on a continued gridlock in Washington.
The S&P 500 gave back 27 points, or 2%, and closed at 1,304. The index traded to a low of 1,303 and we said yesterday morning the 1,300 level could come into play. Given yesterday’s slide, there is now risk down to 1,275, and possibly, the 1,250 area.
The Nasdaq dropped 75 points, or 2.7%, and settled at 2,764. We knew the 2,800 level was in danger of falling once trading began but the bears quickly brought 2,750 back into the picture following yesterday’s drubbing. Tech traded to a low of 2,761 and could face further pressure down to 2,725-2,700.
Although we expected a wave of selling pressure this week following no weekend debt-limit deal, one troublesome sign came from the S&P Volatility Index (^VIX, 22.98, up 2.75) which surged 14% and closed above 22 yesterday. We do a lot of chart work for our Weekly Wrap and this area has held as resistance but was taken out yesterday.
For those of you who are new subscribers, the index indicates fear and yesterday’s spooky climb has created some “panic”. In fact, call it “Scary Movie 5” which is how many days the knuckleheads that run our great country have left to come to an agreement.
At this junction in the ballgame, the “Gang of Six” might have to turn into the “Dirty Dozen” to get something done. We are hoping we see pigs fly and that there will be some sort of debt resolution agreement by Friday, but if not, ALL of America should pull up a lawn chair this weekend and sit on the White House grass to make sure something gets done. This is getting ridiculous.
Futures are pointing towards a bounce so maybe love is in the air this morning. Dow futures are up 23 points to 12,267 while the S&P futures are higher by 5 point to 1,303. The Nasdaq futures are jumping 10 points to 2,368.