Weakness on Wednesday sent the S&P 500 (SPX) back very near critical support, says Jon Markman, editor of Pivotal Point.
It was bound to happen sooner or later. The benchmark S&P closed at 4,443, a loss of 0.6%. The decline was the sixth in seven days and the index has now fallen 2% from its closing high. That is not a huge haircut by traditional stock market selloffs, yet I would be quite surprised if buyers do not regroup in the latter part of this week.
Every decline since March to the rising 50-day moving average for the S&P 500 has been bought aggressively. There is no reason to expect different this time. The current 50-day moving average is at 4,430. If that level fails, the next important failsafe level is 4,396.
The Dow dropped 0.8% to 34,577.57 on Tuesday, and the Nasdaq was 0.5% lower at 15,037.76. Energy and financials were the steepest decliners, with all sectors in the red. The 10-year US Treasury yield fell 4 basis points to 1.28%.
Breadth favored decliners by a big 3-1 margin and there were just 152 new one-year highs vs 126 new lows. Topping the new high list were ASML Holdings, Blackstone, Atlassian, KLA Corp, Palo Alto Networks, Entergy and Warner Music Group.
The US Consumer Price Index climbed 0.3% last month, the smallest gain since January after a 0.5% increase in July, according to data from the Bureau of Labor Statistics. Analysts polled by Econoday expected the CPI to rise 0.4% in August.
Core consumer prices excluding the typically more volatile food and energy categories rose 0.1% in August. Analysts polled by Econoday had forecast an increase of 0.3%.
"We expect modest core CPI prints over the next few months, as used car prices -- the single biggest driver of the spring surge -- continue to fall -- but airline fares and hotel room rates eventually will rebound as the delta wave fades," Pantheon Macroeconomics Chief Economist Ian Shepherdson wrote in a research note.
The downside surprise in US consumer price index growth in August was driven by soft airfares and used car prices that may not persist, while housing rents and other underlying signals "were firmer, suggesting a stabilizing source of support for inflation in the months ahead," Morgan Stanley said Tuesday.
Wynn Resorts (WYNN) and Las Vegas Sands (LVS) slumped 11% and 10% respectively, while MGM Resorts (MGM) dropped 4% after the government of China's autonomous Macao region indicated it plans tougher new legislation underpinning regulation of the gaming industry.
Comcast (CMCSA) shares fell 7.3% after the cable giant's chief financial officer warned of a slowdown in broadband growth at an investor conference. Microsoft (MSFT) gained 1% to lead the Dow. Oracle (ORCL) shares declined 3% after the enterprise software provider reported mixed fiscal first quarter results as sales missed expectations.
Learn more about Jon Markman at Pivotal Point.
