The Dow Jones industrial average capped a dismal week with sharp losses in the stock market today, losing 2% to post its worst close since May 3. At 24,100, the Dow also sank nearly 1.2% for the week, following a 4.5% shellacking in the prior week.
More evidence of slowing growth in retail sales and industrial production last month in China and fresh signs of a softening manufacturing picture in Europe spurred broad selling across the board on Wall Street. Fewer than a dozen of 197 IBD industry groups posted a gain on Friday.
Apple (AAPL) helped lead the broad decline, dropping more than 5 points, or 3%, to 165.48. The iPhone and digital services titan is now trading nearly 30% below a 233.47 peak. Analysts continue to shave their ratings for Apple on concerns over iPhone sales.
It's not uncommon for stock market leaders to form a base, such as the cup with handle, and shed 30% to 33% of their market value in the process. Given that Apple has been in correction mode for more than 10 weeks, it's guaranteed that the Dow Jones industrial component will need months to recover and properly form the right side of a complete new base.
The S&P 500 slid 1.9% lower while sellers beat the Nasdaq composite down by more than 2.2%. The Russell 2000 fell 1.5%.
Volume came in a touch higher vs. Thursday on the Nasdaq, according to early data. NYSE turnover was roughly flat. The current outlook remains under severe selling pressure. Read IBD's The Big Picture column for a daily assessment of the outlook. The Dec. 4 Big Picture story noted a key downgrade in the current outlook for growth stocks.
Dow Jones Leader Gets Whacked
Johnson & Johnson (JNJ) led the downside among the 30 components of the Dow Jones industrials. The medical products giant, which according to a Reuters report had known for decades that its baby powder product contained asbestos, plunged 15 points, or 10%, to 132.80 in volume that jumped seven times its 50-day average.
J&J, with 2.68 billion shares outstanding, saw $40 billion of its stock market value dissolve in a single session. Some institutions came in to shore up the stock near its long-term 200-day moving average. IBD draws the 200-day line, which plots the average closing price over the 200 most recent trading sessions, in black on all daily stock charts at Investors.com.
A Good Breakout Spoiled
On Nov. 7, the stock broke out of a large cup with handle at 143.23 and rallied modestly. Now, the stock has ushered in the golden rule of investing by falling 7%-8% below the proper breakout point. IBD research has found that great stocks typically do not fall more than 7% beneath a correct buy point after breaking out.
Market Leaders Get Hit Hard
Costco Wholesale (COST) dropped nearly 9% to 207.06 in heavy turnover and slashed through its 200-day moving average for the first time in more than a year. Read more about Costco and the state of its base-building work in this Stocks Near A Buy Zone column.
Adobe (ADBE) also sold off hard despite posting robust quarterly results late Thursday. Shares fell more than 7% to 230 and slipped well below the 50- and 200-day moving averages in nearly triple its average volume. The Sector Leader remains in base-building mode.
Mastercard (MA), the IBD Stock Of The Day feature on Friday, fell 1.8% and dipped back below its still rising 200-day moving average. At 195.33, the financial payments giant is trading 13% below the 225.35 peak in a new base.
In Other Financial Markets
Crude oil futures dropped hard. West Texas Intermediate near-term futures slipped more than 2.7% to $51.16 a barrel despite some positive reports on the U.S. economy. Retail sales picked up 0.2% in November vs. the prior month, edging the 0.1% gain expected by Econoday. Excluding auto and gasoline, retail sales climbed 0.4%, missing the 0.5% consensus forecast.
Long-dated U.S. government bonds fell in price for the week. The benchmark 10-year Treasury note saw its yield climb 4 basis points to 2.89% vs. Friday a week ago.
The Federal Reserve is still widely seen raising short-term interest rates by a quarter point for the fourth time this year after a two-day meeting that concludes on Wednesday next week.
The spread between 3-month Treasury bills and 10-year bonds is currently 58 basis points, still down sharply from 122 basis points at the start of the year.
Please follow Chung on Twitter at @IBD_DChung for more on growth stocks, chart analysis and financial markets.
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