The Dow Jones industrial average plunged 1.9% and violated a key price level Tuesday as financials led a sell-off on Wall Street, while Amazon.com (AMZN) escaped the selling and touched a buy point.
The S&P 500 slid 1.5%. In a troubling change, the index fell below a two-week horizontal price range. The Dow also broke below its two-week range and traded below the 50-day moving average. That's a key level that the index had reclaimed May 9.
The Nasdaq composite was down 0.7%. By comparison, the composite is still trading within its two-week sideways trend.
Banks and financials were roiled, two sectors that hit the S&P 500 more than the other big indexes. The SPDR Financial (XLF) exchange traded fund slid 3%, breaking below its 50-day and 200-day moving averages. A drop in bond yields also hurt financials. The benchmark 10-year Treasury note's yield tumbled 11 basis points to 2.81%.
Volume was tracking higher compared with Friday's levels at the same time of day. It's not at all difficult for volume to rise on the day after a three-day weekend. Losers led winners by a 2-1 ratio on the Nasdaq and by 12-to-7 on the NYSE.
The Dow utilities average fell only 0.1%, as the sector gained favor as both a defensive play and as an alternative to bond yields. Dividend-rich assets such as utility stocks compete with bonds for yield.
Tuesday's sell-off originated in Europe, where stocks sold off after a political crisis emerged over the weekend in Italy. Italian President Sergio Mattarella vetoed the appointment of a finance minister who supports leaving the euro. Instead, Mattarella named a former economist at the International Monetary Fund who supports the eurozone as prime minister-designate. The crisis increases the threat of Italy leaving the eurozone, causing uncertainty in the continent.
Investors had more reasons to sell after the White House said it will impose tariffs on $50 billion worth of Chinese imports by June 15.
Few leading stocks stood out amid the broad selling. But Micron Technology (MU) climbed past the 63.52 buy point of a cup base in heavy volume. The relative strength line made a new high, a positive sign. The biggest risk with Micron is that it's a late-stage base. Mizuho Securities reiterated a buy rating with a price target of 70. A Mizuho analyst said Micron should benefit from tight supplies of DRAM memory chips for PCs.
Amazon.com rose past the conventional buy point of 1,617.64 in its base, but it was far from a convincing move. The stock remains above a 1,568.62 handle entry.
The Innovator IBD 50 ETF fell 0.7% as leading stocks sustained the selling in better shape than many other stocks. PagSeguro (PAGS) was the biggest drag on the IBD 50. The Brazil payment company plunged 8% in heavy trading ahead of its earnings report after today's close. Also, Brazil stocks are at the lowest level since late December due to a crippling truckers' strike.
ZTO Express (ZTO) offset most of PagSeguro's hit on the IBD 50. The Chinese delivery service surged 8% to a new high. China's Alibaba (BABA) and its Cainiao logistics division are leading an investment of $1.38 billion in ZTO in exchange for about a 10% stake.
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