How far will stocks fall?
The Dow closes down 217 points amid weak economic reports and worries about interest rates. Falling below 15,000 could mean more selling ahead.
Stocks fell to their lowest levels in a month on Wednesday, after reports on private-sector employment and factory orders were weaker than expected.
The Dow Jones industrials ($INDU) closed below 15,000 for the first time since since May 2. Meanwhile, the Standard & Poor's 500 Index ($INX) is down 4.6% since peaking at an intraday high on May 21.
What's not clear from the selling is how far the market could fall. On one key point, 15,000 for the Dow, the signal suggests there could be more selling.
That would be confirmed with an S&P 500 close below 1,600. The index didn't really come close to breaching that level on Wednesday.
However, compared with losses that Japanese stocks suffered on Wednesday, U.S. declines were modest.
The Dow closed down 217 points to 14,961. The blue chips had been off as many as points to 14,999 after falling as many as 232 points. The S&P 500 dropped 22 points to 1,609 after sliding as many as 24 points. The Nasdaq Composite Index ($COMPX) fell 44 points to 3,401. At its low, the index was off 47 points.
One catalyst for the sell-off was the ADP Employment Report, which estimated private employers added 135,000 jobs in May. The consensus estimate was 157,000. There was further bad news when the government said April factory orders were weaker than expected.
Offsetting those figures was an Institute for Supply Management Report showing the service sector of the economy was stronger than expected.
There was constant chatter about when the Federal Reserve will start to reduce the scope of its bond-buying program -- which many fear will result in sharply higher interest rates. The benchmark 10-year Treasury yield, however, fell to 2.10% from 2.137% on Tuesday.
The U.S. stock market had been enjoying probably the best start to a year since 1995, although there have been worries the market was getting overheated.
But the market began to struggle in late May as indexes and stocks hit record highs and relative valuations hit high levels. "It was hard to find stuff that was interesting," said Seattle money manager Patricia Edwards.
The Dow, S&P 500 and Nasdaq hit intraday highs on May 22. The Dow reached a closing high on May 28, while the S&P 500 and Nasdaq hit closing highs on May 21. Since the May 22 intraday highs, the Dow is off 3.5%. The S&P 500 is down 4.4%, while the Nasdaq is down 3.5%.
The relative strength indexes for the Dow, S&P 500 and Nasdaq were at 87 on May 21, where a reading above 70 is an overbought signal.
On Wednesday, the Dow's RSI was 37, with the S&P 500 at 32.4 and the Nasdaq at 37. A reading below 30 is an oversold signal.
For the year, the Dow is still up almost 14.2%, with the S&P 500 up 12.8% and the Nasdaq up 12.7%.
It's not clear is if the recent selling will evolve into a correction of 10% or more from those intraday peaks. A correction would take the Dow down to around 13,988, the S&P 500 to 1,518, and the Nasdaq to 3,180.
Along the way, there are some major support levels: Most important for the S&P 500 are 1,600, 1,550 and 1,465. For the Dow, the key supports are 14,540 and 14,000. The Nasdaq supports to watch are 3,250 and 3,200.
Don't forget the 50-day moving averages, a key indicator of investor confidence. The three indexes finished just above their 50-day averages on Wednesday.
Wednesday's sell-off came after stocks in Japan slumped badly, yet again. The Nikkei-225 Index ($JP:N225) lost more than 500 points for the fourth time since May 22. The index had risen as much as 50% by May 22. It has fallen 18.4% from its intraday high of 15,942.60 on May 23. European stocks were lower as well on Wednesday.
The day's losses were quite broad, with all sectors of the S&P 500 finishing lower. Materials stocks were the biggest losers.
Forty-two of 44 domestic indexes that I track were lower. The winners were both gold-related indexes: the NYSE Arca Gold Bugs Index ($HUI) and the Philadelphia SE Gold/Silver Index ($XAU). The SPDR Gold Shares exchange-traded fund (GLD), climbed 29 cents to $135.52.
Only one of the 30 Dow stocks was higher: UnitedHealth Group (UNH). The laggards were Intel (INTC) Alcoa (AA) and DuPont (DD).
Thirty-one S&P 500 stocks were higher, led by Juniper Networks (JNPR) and Dollar General (DG). Building-materials company Fastenal (FAST) and iron-ore producer Cliffs Natural Resources (CLF) were the laggards.
Just 12 stocks in the Nasdaq-100 Index ($NDX) were higher, led by Micron Technology (MU) and Bed Bath & Beyond (BBBY). The laggards were Fastenal and biotech company Celgene (CELG). The index was down 37 points to 2,937.
Gold settled up $1.30 to $1,398.50 an ounce. Crude oil settled up 43 cents to $93.74 a barrel in New York. Brent crude was down 38 cents to $102.87 a barrel.
More on Top Stocks
Please allow me to explain something about the Stock Market. It's a game. And it's the only game in town, now that savings deposits are earning, literally, next to nothing.
The government is keeping interest rates low, thus to stimulate the Stock Market. FYI, the last time I checked, banks will not make loans to gamble the Stock Market. But that's what folks are doing with their money. Taking it out of low-interest savings and then, plowing it into the Stock Market. Now. When you add to that, the fact that the Treasury is printing more money than ever. Well, you've got a time bomb. Just check the value of the Almighty Dollar against the Canadian and Australian dollars. Smell the coffee? You were all warned, and you all swallowed the Kool-Aid. And I am frightened.
I paid over $4 for a gallon of gas today guys.
Maybe this is the problem????
The more I'm spending on gas the less I have to spend on other things....
one's only job is to figure when to enter and exit...thats all.
Gee, never saw that coming did you?
Now the answer is 2014? Ha!
The market is finally starting to react to the fact that every metric used to measure the health and viability of our country's economy is heading in the wrong direction, despite what the current administration would like us to believe. The threat of super-inflation is real, and recklessly printing money to offset the deficit could render the dollar worthless.
Wake up people! These clowns in Washington are dangerous.
Copyright © 2014 Microsoft. All rights reserved.
'We're not exactly in a uniformly strong market,' says the notably pessimistic newsletter publisher.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.