Stocks drop as the Dow's Tuesday streak stalls
The blue chips fall 76 points after 20 straight Tuesday gains. Interest-rate worries bother investors. The Tuesday streak generated 75% of the Dow's gain from early January.
The streak did not go quietly, however. The Dow fell more than 100 points as June has opened with a decidedly volatile bent. Here's what we mean:
The Dow jumped up about 50 points by about 10:30 a.m. ET on Tuesday, then tumbled more than 200 to a loss of about 153 points. Some buying kicked in, trimming the losses to around 30 points -- and the blue chips finally ended the day down about 76 points at 15,178.
Not a horrible loss, but a loss that makes you pay attention, especially if you think the stock market is headed lower. The Standard & Poor's 500 Index ($INX) was off 9 points to 1,631 after falling as many as 16. The Nasdaq Composite Index ($COMPX), which had been down as many 35 points, closed down 20 points to 3,445.
The S&P 500 and Nasdaq had their own Tuesday winning streaks capped at 10.The reason most offered for why the market had such violent swings on Tuesday was that investors are worried about if and when the Federal Reserve will start dialing back its bond-buying program to keep a lid on possible whiffs of inflation. Whiffs, that is, because many inflation measures don't show much inflation at all.
But bond yields have been rising since the 10-year Treasury yield bottomed at 1.631% on May 2. The yield was at 2.137% on Tuesday. That was up from Monday's 2.134% and a gain of nearly a third since the May 2 low. The yield also at a level last seen in April 2012.
The fear is, if the Fed lets rates rise too far too fast, the recovery will get choked, especially the nascent housing recovery.
Plus, unease about Friday's big jobs report, due before the market open, may be weighing on markets. The consensus estimate is for payroll employment to rise 165,000 while the unemployment rate holds at 7.5%. The issue may turn on how much government-sector payrolls are trimmed.
An early hint of what may come on Friday will be in the ADP Employment Report, due before Wednesday's open.
Before we bid adieu to the Dow's winning streak, here's how powerful it was:
The streak began after the Dow fell 55 points on Jan. 8. Over the next 20 Tuesdays, the index added 2,081 points as it rose to a record close of 15,409.39 on May 28. A total of 1,573 points -- about 76% of the total -- came on those Tuesdays.
The May 28 close was the Dow's highest. It hit an intraday high of 15,542.40 on May 22. The S&P 500 and Nasdaq hit intraday highs on May 22 as well.
The charts of all three indexes suggest each is now in a downtrend. The Dow is down 2.35% from its May 22 intraday high. The S&P 500 is down 3.3%, and the Nasdaq is down 2.5% over the same period.
That the market was likely to pullback was pretty clear by mid-May, perhaps earlier with the Dow, S&P 500 and Nasdaq up 17.2%, 16.9% and 15.9%, respectively on May 20. What's not clear now is how big the pullback may be or how long it will last.
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This means either one of two things:
1-Either the Fed finally listened and stopped buying the market up today.
2-The market went down in spite of the Fed’s buying, in which case we’re in for a doozy of a collapse when it really does stop buying.
It’s all you Benny B. It’s all you forever now.
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