The stock market’s skid hit its third day as the major indexes marked their longest combined losing streak since March.
The Dow Jones Industrial Average fell 179 points, or 0.4%. The S&P 500 was down 0.5%. The Nasdaq Composite was down 0.5%. It’s the second time this year that all three fell together for three days in a row and the first time since March 28, according to Dow Jones Market Data.
The yield on the 2-year Treasury note rose to 3.66% while the 10-year yield was up to 4.17%.
Bets on a half-point in rate cuts through December dropped to 60.5% in the wake of a final estimate of second-quarter gross domestic product.
At an annual rate of 3.8%, the U.S. economy actually grew a half a percentage point more than the prior reading from the Bureau of Economic Analysis suggested. The BEA said the shift was primarily due to an upward revision to consumer spending.
This week’s slide followed indicators that signalled the S&P 500 was “short-term overbought.”
“We agree that the economy is strong and growing and we have been impressed with corporations’ ability to navigate a challenging environment and produce strong results, but a lot of that good news is already priced in–and then some,” writes Chris Zaccarelli, chief investment officer for Northlight Asset Management. “If we see some volatility in the near term (which we believe is a strong possibility) it will be because we are starting with much higher-than-average valuations, leaving little room for error.”
Stocks have been pulling back this week in the absence of major economic data. The personal consumption expenditures price index is due out tomorrow morning. Wall Street will also be paying close attention to efforts in Congress to avert a government shutdown.
“Over the next few weeks, equities are the most vulnerable to a downside move since the April lows,” wrote Jonathan Krinsky, BTIG’s chief market technician. “High volatility names were as extended as they have ever been. We are starting to see those reverse lower, along with many other areas like retail favorites. Further, we have continued weakness from laggards such as private equity, which suffered its worst decline yesterday since April.”
The S&P is still trading well above its 50-day moving average, Krinsky notes.
“Testing the 50 DMA (6446) would be consistent with what we typically see late in the year, and set-up a better year-end rally entry point,” he writes.