U.S. equities stage fourth worst daily drop on increasing global recession concerns and strong drop in commodity prices. Financials and energy stocks lead the declines
U.S. equities returned from the Thanksgiving Holiday nursing a massive hangover, giving up nearly half of the gains from last week’s Thanksgiving rally, as economic data regarding manufacturing and housing from key world economies reignited recession fears. Financials and commodity-based stocks once again led declines, as commodities staged a massive across the board sell off while the U.S. Dollar gained strength and investor tolerance for risk fell away.
Additional negative sentiment was set in motion after a report by the Bureau of Economic Research determined that based on its criteria, America’s economy has been in a recession since December of 2007. While the market took this announcement with little shock or surprise, the addition of this confirmation accelerated the downward move in equities, particularly in financials-the segment of the market, which bears most of the blame with regards to misdirection of facts and figures as well as forming the basis of the credit crisis.
JP Morgan and American Express led the financial sector to a retreat of nearly 10%. General Electric and Caterpillar also posted near double-digit losses as China, UK and U.S. reports on manufacturing showed greater than expected declines. Energy stocks fell as crude oil posted a near 9% loss after OPEC chose to not to act on production cuts.
Technically, U.S. equities pulled back near key support levels across the board. December Dow futures touched near the 8100 level, which on a 60-minute chart represents a 50% Fibonacci retracement. Daily and 60-minute RSI shows the market still has room to correct. Look for next support level in Dow to be near the 7970 level. Breaking this level, market should find next level of support at 7800. Upside resistance should be at 8290, with next level at 8400 in near term.
December Dow futures settled at 8139, down 682. S&P futures settled at 815.80, down 79.50. NASDAQ futures settled 1094.50, down 91.50.
Rich Roscelli and Paul Brittain
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