Business software, internet, chip and FANG stocks got pummeled on Tuesday as the Nasdaq composite suffered the worst of the stock market’s decline. The more broadly diversified Dow Jones industrial average fell less.
With less than an hour to go in the session, the tech-driven Nasdaq sank 3%, essentially wiping out nearly all of Monday’s strong rebound. The Nasdaq 100 reversed from session highs to fall nearly 3.7%.
Meanwhile, the Dow Jones industrial average, generally a lagging market index, resisted the stock market sell-off for much of the session, but was down more than 1.5% heading into the close. Defensive Dow Jones plays Procter & Gamble (PG) and Johnson & Johnson (JNJ) rose modestly.
Worries over the future of self-driving technology efforts in the wake of a fatality during a recent Uber driving test in Arizona appear to be sparking some of the sell-off across the tech sector.
The automaker group fell the most among IBD’s 197 industry groups and subgroups, down 7.2%. Tesla (TSLA) paced the decline, dropping more than 8% in volume running 130% above usual levels. The all-electric vehicle pioneer undercut support near the 290-300 level it had been enjoying since early May of 2017.
The Dow saw at least eight of its 30 stocks fall 2 points or more, including tech heavyweights Microsoft (MSFT) and Apple (AAPL). Apple, down 2.6% at 168.34, failed to hold early gains one day after it reclaimed the key 50-day moving average. However, the iPhone giant is still just 8% below its all-time high of 183.50. Watch for a potential new base to develop.
The S&P 500 slumped 1.4%, and breadth was poor on both main exchanges. But volume was running lower vs. the same time Monday. Utilities paced the upside as U.S. government bonds dropped hard. The yield on the benchmark U.S. Treasury 10-year bond dropped to 2.78%, the lowest since Feb. 6.
Financial giants Visa (V) and Goldman Sachs (GS) also lost 2 points or more. Visa, falling nearly 3% to 117.40 in average trade, has been unable to rebound sharply since it sliced through the 50-day moving average on Thursday for the second time this month.
Notice on a daily chart how on March 2, the first time the credit card and debit card payment processor undercut the 50-day line, Visa managed to bounce off its lows and finish mildly above that key support-and-resistance level. So, continued to failure to quickly retake the 50-day moving average would indicate a change in the stock’s character.
Dow Jones tech component Microsoft reversed from decent early gains and plunged nearly 4%, back below the key 50-day moving average.
Boeing triggered a key sell signal when it ditched its 50-day moving average in heavy volume two weeks ago. But since then, the stock has not given up a whole lot of ground. This suggests that the aerospace giant may have enough long-term institutional demand to craft a new base in the future.
At 321, the military jet, airline and satellite maker trades less than 14% below an all-time peak of 371.60. If the stock can hold above its recent session lows, the chances of a shallow cup base or a flat base grow.
The Innovator IBD 50 (FFTY) also reversed from early session highs to fall 1.48, or 4.3%, to 33.10. Volume was flat. FFTY is down minimally since Jan. 1 after rallying more than 37% in 2017. The S&P 500, at 2612, remains above its long-term 200-day moving average but is now down 2.3% year to date, excluding dividends. The S&P SmallCap 600 is off 0.9% over the same time frame.
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