By Anora Mahmudova and Sara Sjolin, MarketWatch
CBOE Volatility index jumps 11%
The S&P 500 suffered its biggest one-day percentage decline
in six weeks Tuesday, erasing all the gains form the previous two
sessions as U.S. stocks closed sharply lower.
Feeding jitters was a trade-deficit report that indicated the
nation's trade gap hit its highest level in seven years as the West
Coast port dispute ended. The widening trade deficit suggests that
the U.S. gross domestic product reading will go from a meager 0.2%
to negative territory when figures are revised later this
month.
Technology, biotechnology and small-cap stocks led losses.
A big 2.3% drop in Apple Inc.(AAPL), the heaviest weighted stock
in the index, weighed on the Nasdaq Composite (RIXF), contributing
to a fall of 77.60 points, or 1.6%, to 4,939.33 for the tech-laden
index.
Meanwhile, the Russell 2000 index (RUT) of small companies fell
17.80 points, or 1.4%, to 1,215.42.
Stocks began the session weaker Tuesday following a mixed bag of
economic reports and earnings. General nervousness was apparent
from the jump in implied volatility on the S&P 500. The CBOE
Volatility index, better known as Wall Street's fear gauge rose
11%.
Jeff Clark, trading analyst at Stansberry Research, said recent
selling action reflect investor skittishness ahead of the June
Federal Open Market Committee meeting, where Fed officials will
weigh the pace of interest rate hikes.
"Over the past several years, 'buy the dip' strategy worked very
well, but it seems investors now turned to 'sell the strength'
mentality. We can see that from the market's inability to follow
through on the rallies," Clark said.
The S&P 500 (SPX) closed 25.03 points, or 1.2%, lower at
2,089.46, with losses across the board, while the Dow Jones
Industrial Average (DJI) tumbled 142.20 points, or 0.8%, to
17,928.20, with nearly all 30 blue-chip components lower.
"There is more downside momentum, which usually precedes a
correction. Markets are overdue for a correction and this one is
going to be a harsh one. I would not be surprised to see a 15%-20%
drawdown," Clark warned.
On the bright side, services activity accelerated in April to a
stronger-than-expected reading.
Data: Investors are already looking ahead to the closely
followed nonfarm-payrolls report on Friday, but have some data to
digest Tuesday.
The U.S. trade deficit soared 43% in March
(http://www.marketwatch.com/story/us-trade-deficit-leaps-43-in-march-to-highest-level-since-1996-2015-05-05),
largely reflecting the end of a labor standoff at West Coast ports
that allowed piles of imported goods sitting on docks to be
processed and shipped to domestic customers.
Services activity accelerated in April to a
stronger-than-forecast reading, according to Institute for Supply
Management data released Tuesday.
Earnings:Estée Lauder Cos.(EL) shares jumped 4% after the
cosmetics company's earnings came in above expectations.
Netflix Inc.(NFLX) shares rose 1.9% after the streaming company
was upgraded to a buy from underperform at Bank of America Merrill
Lynch.
Shares of Qualys Inc.(QLYS) plunged 33% after the cloud-security
company late Monday posted a disappointing outlook
(http://www.marketwatch.com/story/comcast-cablevision-tyson-foods-earnings-in-focus-2015-05-01).
For more on today's notable movers read Movers & Shakers
column
(http://www.marketwatch.com/story/sprint-news-corp-disney-groupon-earnings-in-focus-2015-05-05).
Other markets: Chinese stocks slid 4.1%, suffering their second
largest daily fall this year
(http://www.marketwatch.com/storyno-meta-for-guid).
European stock markets closed mostly lower on Tuesday
(http://www.marketwatch.com/story/eu-lifts-eurozone-growth-forecast-2015-05-05-5485346).
Oil prices (CLM5) climbs $1.47, or 2.5%, to settle at $60.40 a
barrel, the highest level for crude in months. Gold prices rose
$6.40, or 0.5%, to settle at $1,193.20 an ounce after tapping an
intraday high of $1,199.30. The dollar (DXY) lost ground gained on
Monday against the euro.
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