Wall Street falls sharply as technology suffers heavy losses
|- CBOE Volatility Index rises more than 20% on Wednesday.
- Communication services drop 4.88% to lead losses.
- Defensive stocks close in the positive territory.
After starting the day on a mixed note, major equity indexes in the United States lost their traction and recorded heavy losses with the S&P 500 and the Dow Jones Industrial Average indexes both turning red for the year.
On reports pointing out to concerns over slowing demand, chipmakers Intel and Texas Instruments dropped sharply to weigh on the S&P 500 Technology Index, which closed the day 4.43% lower while the S&P 500 Communications Services erased 4.88%. The weak market sentiment reflected by a 27% surge seen in the CBOE Volatility Index, Wall Street's fear gauge, also put extra weight on these risk-sensitive sectors. However, Microsoft's shares rose nearly 4% in the after-hours trading and could help the sector stage a recovery on Thursday. The tech giant reported an impressive 19% increase in quarterly gains led by a 44% rise in gaming revenue.
Furthermore, after the weekly EIA report showed another larger-than-expected build in oil inventories, crude oil prices erased their daily gains, and the S&P 500 Energy Index dropped 3.8%.
On a positive note, the so-called defensive indexes, the S&P 500 Real Estate and the S&P 500 Utilities, added 2.3% and 1.13% respectively. Commenting on today's market action, "it's been the one big weakness in the U.S. economy. That's something that has people on edge," Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina, told Reuters.
The Dow Jones Industrial Average lost 608.15 points, or 2.41%, to 24,583.28, the S&P 500 erased 84.53 points, or 3.08%, to 2,656.16 and the Nasdaq Composite fell 329.14 points, or 4.43%, to 7,108.40.
DJIA technical outlook by FXStreet Chief Analyst Valeria Bednarik
The daily chart for the Dow indicates that the decline could continue, as technical indicators head south almost vertically, despite entering the oversold territory, while the index collapsed below all of its moving averages.
In the shorter term, and according to the 4 hours chart, the index is firmly bearish, with the Momentum indicator heading south at fresh 2-week lows, the RSI at 28 and also far below bearish moving averages.
Support levels: 24,581 - 24,530 - 24,462.
Resistance levels: 24,690 - 24,745 - 24,800.
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