Wall Street closes in red, Nasdaq leads losses as tech underperforms

CBOE Volatility Index rises more than 13% on Thursday.
Risk-sensitive technology sector suffers heavy losses.
Rate hike expectations weigh on financials.

Eren Sengezer FXStreet

Major equity indexes started the day on the backfoot on Thursday as the disappointing earnings figures from industrial firms escalated concerns over the potential negative impact of Trump administration's trade conflict with China. The CBOE Volatility Index, Wall Street's fear gauge, rose more than 13% on the day to show that the market action was dominated by risk-aversion.

The risk-sensitive S&P 500 Technology and Communication Services indexes fell 2.02% and 1.84%, respectively. Moreover, the trade-related S&P 500 Industrials index erased 1.8%.

Meanwhile, after the FOMC's September meeting minutes heightened the expectations for another rate hike in December yesterday, the S&P 500 Financials Index stayed under pressure and lost 1.55%. On a positive note, the so-called defensive S&P 500 Utilities Index closed 0.08% higher.

Commenting on Wall Street's daily performance, “The market is a little bit on edge as they digest earnings, rising rates and minutes from the Fed meeting. There is some spill over in volatility from last week. There are lingering concerns from last week’s drop and what that means. The sharp rise in rate and tariffs are on everybody’s minds now,” Paul Brigandi, managing director and head of trading at Direxion in New York, told Reuters.

The Dow Jones Industrial Average dropped 328.41 points, or 1.28%, to 25,378.27, the S&P 500 lost 40.62 points, or 1.45%, to 2,768.59 and the Nasdaq Composite fell 160.03 points, or 2.09%, to 7,482.68.

DJIA technical outlook by FXStreet Chief Analyst Valeria Bednarik

The DJIA is poised to extend its slump, according to technical readings in the daily chart, as the index is back below the 100 DMA, while technical indicators have resumed their declines within negative levels, the Momentum at fresh multi-month lows and the RSI currently at 36. In the mentioned chart, the 200 DMA remains directionless some 300 points below the current level.

Shorter term, and according to the 4 hours chart, the risk is also skewed to the downside as it settled below the 20 SMA, now losing upward strength, while technical indicators are back into negative ground, the Momentum heading sharply lower and the RSI trying to stabilize around 43.

Support levels: 25,358 - 25,297 - 25,236.

Resistance levels: 25,481 - 25,547 - 25,611.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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