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Wall Street closes substantially lower for the second straight day

  • All major sectors close in red on Thursday, energy leads losses.
  • CBOE Volatility Index rises 13%.
  • Investors turn their attention to Q3 earnings.

Although it looked like an early recovery attempt witnessed in the technology shares was helping the major equity indexes in the U.S. start retracing yesterday's losses, the sell-off picked up strength in the second half of the day with the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite closing the day 2.14%, 2.06%, and 1.2% lower.

Commenting on Wall Street's dismal performance, "Equities have some real concerns, rising interest rates, trade contention with China, and the natural worry over an ageing bull market. But stocks also have enormous profits. The S&P  500 was up 59 percent from its January 2016 low at Wednesday's open. Yesterday's plunge was as much about repositioning and profits as it was about tech fears on trade and the possibility of lower growth next year," FXStreet Senior Analyst Joseph Trevisani said.

The risk-off mood and the weekly EIA report, which showed a larger-than-expected buildup in crude oil inventories, continued to weigh on the price of the barrel of West Texas Intermediate on Thursday. The commodity-sensitive S&P 500 Energy Index lost 3.09% to record the biggest daily decline within 11 major sectors.  

Meanwhile, today's inflation report showed that the CPI rose 2.3% and 0.1% on a monthly and yearly basis, respectively. Although these numbers stayed slightly below the analysts' estimates, they did little to nothing to change the expectations of another 25 bps Fed rate hike in December. The S&P 500 Financials Index fell 2.93% to reflect the concerns over the potential negative impact of higher rates on the economic growth.

With the third-quarter earnings season kicking off tomorrow, investors will look for strong numbers to forget about the last two days.

DJIA technical outlook via FXStreet Chief Analyst Valeria Bednarik

The DJIA attempted to trim losses during the American afternoon but met selling interest in the 25,670 region, resuming from there its decline to reach its lowest since last July, at 24,897. Having bounced from this last, the index anyway closed the day a few points below the 200 DMA and far below the shorter ones, while technical indicators maintain their strong vertical downward slopes, despite being in extreme oversold readings.

In the 4 hours chart, the 20 SMA gains bearish momentum after crossing below the 100 and 200 SMA, all of them far above the current level, while technical indicators maintain their bearish slopes within oversold readings, the Momentum at fresh multi-month lows and the RSI currently at 19, after hitting earlier in the day 12.

Support levels: 25,008 - 24,951 - 24,897.

Resistance levels: 25,100 - 25,156 - 25,210.

Author

Eren Sengezer

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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