A sell-off in Asian and European markets spread to the U.S. stock market on Monday, although indexes reduced their losses. The IBD 50 made a surprisingly strong showing.
The Nasdaq composite slid 0.8%, piercing its 21-day exponential moving average. The S&P 500 sold off 1.4% and is testing support at the 50-day moving average. The 50-day line has provided support the entire year, having pulled the index out of trouble six times already.
Both indexes Monday saw their worst single-day losses since May 12.
The Dow Jones Industrial Average gapped down to a 2%, 700-point drop. The Dow slid below its 21-day and 50-day lines. The Russell 2000 fell 0.9% but had been down as much as 2.6%.
Volume was higher on the Nasdaq and NYSE compared with the same time on Friday.
U.S. Stock Market Today Overview
Last Update: 11:50 AM ET 7/19/2021
Global markets tumbled on growing concerns that the delta variant of Covid-19 is causing a reversal in virus cases worldwide. The Hong Kong Hang Seng slid 1.8%, and the Tokyo Nikkei shed 1.3%. The Paris CAC 40 was off 3.2%, the German DAX lost 3.1% and Euro Stoxx 50 fell 3.2%. The London FTSE 100 was down 2.6%.
Covid-19 Worries Hit Stock Market
Covid-19 cases are rising in some countries and U.S. states, even some with high levels of vaccinations. Nearly all new cases are among people who have not been inoculated.
Travel, consumer, energy and some cyclical stocks were hit the hardest. IBD’s airline industry group swooned more than 4%. The lodging industry fell 2.6%. The S&P Retail SPDR ETF (XRT) fell 0.4% but was well off an earlier drop of nearly 3%. The Dow transports skidded 1.8%.
Energy Select Sector SPDR (XLE) fell 3.8%. The ETF is down 17% from its prior high, a decline that would qualify it as a correction. A drop of 20% would make it a bear market for the sector.
On Sunday, the OPEC+ group of oil producers agreed in a special meeting to increase its collective production by 400,000 barrels per day starting in August, and will continue expanding at that monthly pace through September 2022. U.S. crude prices plunged 6.5% to $67.22 a barrel.
Nine of the 20 weakest IBD industry groups were in oil & gas, including drilling, exploration, refinery and pipeline groups.
Selling was broad, with declining stocks outnumbering advancers by nearly 5-to-1 on the NYSE and by 11-to-5 on the Nasdaq. Pandemic worries sent investors into bonds. The yield on the 10-year Treasury note fell to 1.18%, off 12 basis points to the lowest level since February.
IBD 50 Outperforms Stock Market
Leading stocks were an unexpected bright spot. The Innovator IBD 50 ETF (FFTY) rose 0.3% after making a bullish price reversal. Alphabet (GOOGL) fell below its 10-day moving average but remains above the 2,431.48 buy point.
Quite a few IBD 50 stocks pared losses and even bounced off support levels, including Nvidia (NVDA), Cricut (CRCT), Skyline Champion (SKY) and Sea Ltd. (SE) Moderna (MRNA) rallied more than 5%, apparently on expected demand for its Covid-19 vaccine.
Late Friday, IBD downgraded its market outlook to “uptrend under pressure.” Investors should be more guarded, taking some profits and being extra picky about stock purchases. It’s a good time to get off margin, too.
Five9 (FIVN) gapped up to a 4% gain after Zoom Video Communications (ZM) announced Sunday it will acquire the business communications company in a stock deal valued at $14.7 billion. The offer represents a 13% premium above Five9’s closing price on Friday. Zoom shares fell 3.5% and are more than 40% below the prior high.
Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia
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