March 19, 2024

Questions Remain as Market Falls for Second Day

The stock market fell again on Thursday and the Standard Poor’s 500-stock index closed below a crucial technical level after disappointing financial forecasts from eBay and other companies cast doubt on the market’s recent strength.

The S. P. 500 ended below its 50-day moving average of 1,543.04 for the first time this year, giving more weight to analysts’ concerns that the market’s recent rally was losing momentum, particularly after two days of sharp declines this week.

The Nasdaq 100 and the Russell 2000 indexes both have closed below their 50-day averages this week, adding to the overall technical pressure on the market.

Technology led the day’s fall. Shares of eBay dropped 5.9 percent to $52.82, a day after the e-commerce company posted results and gave a disappointing earnings forecast for the second quarter. The S. P. technology sector index lost 1.4 percent.

Apple shares extended their slide from Wednesday, when the stock broke below $400 on an intraday basis for the first time since December 2011. The stock tumbled 2.7 percent to close at $392.05 on Thursday.

The CBOE volatility index, Wall Street’s fear index, gained 6.4 percent to 17.56. The VIX, as it is known, is up roughly 46 percent for the week so far. It still remains well below its recent highs, but the gains could signal a change in the market trend.

“There’s definitely technical damage,” said Bruce Zaro, chief technical strategist at Delta Global Asset Management. “I think that the period we had that had volatility tamped way down has likely ended.”

Stocks have rallied for much of the year on expectations that the American economy would continue to strengthen and that the Federal Reserve would keep its economic stimulus in place.

More recent data on the economy has been less upbeat. On Wednesday, reports showed that factory activity in the mid-Atlantic region cooled in April and that the index of leading economic indicators, a gauge of future economic activity, fell in March for the first time in seven months.

The Dow Jones industrial average slid 81.45 points, or 0.56 percent, to close at 14,537.14. The S. P. 500 dropped 10.40 points, or 0.67 percent, to 1,541.61. The Nasdaq composite index fell 38.31 points, or 1.20 percent, to 3,166.36.

After the bell, a number of prominent technology companies reported their financial results, including I.B.M., whose shares fell 4.2 percent to $198.45 in after-hours trading after its earnings missed analysts’ expectations.

After hours, shares of Google rose 2 percent after it released first-quarter results. It closed at $765.91. Shares of Microsoft shot up 2.7 percent to $29.57 after posting its results.

During Thursday’s regular session, volume was roughly 7.05 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT. In comparison, the average daily closing volume is about 6.36 billion this year.

Volume has been heavier on negative days this week, as many investors have anticipated a pullback for some time after stocks’ strong run to start the year and moved quickly to take profits.

The S. P. 500’s moving average was also the floor of the trading range during the last month, making 1,543 a crucial technical support, according to Richard Ross, global technical strategist at Auerbach Grayson.

Mr. Ross and other analysts noted that the S. P. 500 had posted negative second quarters in the last three years.

The S. P. health care sector also experienced big declines, with the UnitedHealth Group down 3.8 percent at $59.69, after the insurer lowered its 2013 revenue outlook.

Other decliners included Morgan Stanley, whose shares dropped 5.4 percent to $20.31 after the bank reported revenue from fixed-income and commodities trading fell sharply from a year earlier. Shares of Bank of America, which posted disappointing results on Wednesday, fell 2.2 percent to $11.44 on Thursday.

The earnings of companies in the S. P. 500 are expected to have risen 1.9 percent in the first quarter, up from the 1.5 percent estimate at the start of the month, based on actual results from 82 companies and estimates for the rest, according to Thomson Reuters data.

Of companies that have reported, 72 percent have topped analysts’ expectations for their earnings, but only 43.9 percent have exceeded revenue forecasts.

In the bond market, interest rates slipped. The price of the Treasury’s 10-year note rose 4/32, to 102 27/32, while its yield dipped to 1.69 percent, from 1.70 percent late Wednesday.

Article source: http://www.nytimes.com/2013/04/19/business/daily-stock-market-activity.html?partner=rss&emc=rss