By Anora Mahmudova and Sara Sjolin, MarketWatch
CBOE Volatility index jumps 8%
The mood on Wall Street turned bearish on Tuesday, with
technology and biotechnology stocks leading the losses.
The tech-heavy Nasdaq Composite (RIXF) fell more than 1.3%, to
4,952.56, driven by a selloff in biotechs and big technology
shares. The heaviest-weighted stock in the index, Apple Inc. (AAPL)
fell 1.9%.
Stocks were already lower following a mixed bag of economic
reports and earnings while implied volatility on the S&P 500,
as measured by the CBOE Volatility index jumped nearly 9%.
A trade-deficit report showed that the nation's trade gap hit
its highest level in seven years as the West Coast port dispute
ended. The trade 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.
On the bright side , services activity accelerated in April to a
stronger-than-expected reading.
The S&P 500 (SPX) fell 16 points, or 0.8%, to 2,097 with
nine of its 10 main sectors trading lower. Utilities and technology
stocks led the losses.
The Dow Jones Industrial Average (DJI) lost 95 points, or 0.5%,
to 17,977.
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
though on the rallies," Clark said.
"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 noted.
Data: Investors are already looking ahead to the top-tier
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 5.4% after the
cosmetics company's earnings came in above expectations.
Netflix Inc. (NFLX) shares rose after the streaming company was
upgraded to a buy from underperfrom at Bank of America Merrill
Lynch.
Shares of Qualys Inc.(QLYS) plunged 29% 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 were struggling for direction Tuesday
(http://www.marketwatch.com/story/eu-lifts-eurozone-growth-forecast-2015-05-05-5485346).
Oil prices (CLM5) advanced and most metals rose. The dollar
(DXY) traded mixed against other major currencies.
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