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 0.4% for the year.
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 much at all.
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 closed 1.6% lower, only a little better than the nearly 1.7% 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 1.9% but remained near its 50-day line at 260.21.
According to IBD Stock Checkup, FedEx stock ranks No. 1 within the Transportation-Air Freight industry group, despite holding a mediocre 79 Composite Rating.
The Composite Rating runs from 1 to 99 and is best used as a stock selection tool, not for timing buys or sells. True stock market winners generally hold a 95 Composite Rating at the start of their big runs, especially when the market goes into a confirmed uptrend.
Stock Market Internals Suffer Another Hit
Breadth was terrible in the stock market. At one point, 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.
Dow Jones Falls As Volume Rises
Financial companies slid hard. The interest rate-sensitive Financial Select Sector SPDR ETF (XLF) fell 1.6% and hit a new four-month low.
The Dow Jones utility average bounced off its lows, however. It rebounded 0.8% to 789.40. However, the defensive 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 utility average dropped as much as 2.2% intraday.
Volume increased more than 3% 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.
McCarthy Ousted As House Speaker
House Speaker Kevin McCarthy lost his post as the leader of House Republicans. McCarthy earlier lost an initial referendum to table or kill Rep. Matt Gaetz’s motion to vacate the speaker position. According to CNN, 216 representatives voted “Yea” for the California Republican’s removal vs. 210 “nay” votes. The motion, initiated by Rep. Matt Gaetz of Florida, needed a simple majority to pass.
Shortly after the stock market’s close, the House narrowly voted to oust McCarthy as Speaker. Republicans, which hold the majority in the House, must now elect a new speaker.
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 nearly 4% to 306.12 in above-average volume, has fallen further below its 50-day moving average and long-term 200-day line. It had 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.
According to Yahoo Finance, analysts see Goldman posting a 21% decline in third-quarter earnings to $6.51 a share vs. $8.25 a year earlier. Keep in mind that among the 16 analysts polled, the EPS estimates range from $4.77 to $8.35.
Wall Street sees revenue dipping 4% to $11.54 billion but rebounding 10.2% to $10.68 billion in the fourth quarter. That would boost Q4 profit for Goldman to $6.80 a share, up 105%.
In The Dow Jones: AXP Stock
Fellow Dow Jones component American Express (AXP) dropped 3% to 145.05. Volume jumped 53% 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 1.09, or 0.6%, to 188.92. No other member of the Dow Jones industrials rose 1 point on Tuesday. But the megacap stock has now climbed only four 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.
YOU MAY ALSO LIKE: