The Dow Jones Industrial Average sank more than 1,000 points Monday. The Dow lifted off its low of the day though, closing down 1,029 points. Among major Dow Jones components, UnitedHealth stock and Apple stock were among those falling 4% or more.
XThe coronavirus-inspired sell-off infected Wall Street on Monday as the virus now threatens to damage global supply chains and the global economy.
Monday's plunge marks one of the largest daily point drops for the Dow in its 124-year history. But it's important to acknowledge that point drops are less meaningful than overall percentage drops. Today's 3.5% sell-off in the Dow Jones ranks nowhere close to its worst daily percentage drops, which extended to 23% during the crash of 1987, for example.
Additionally, the major U.S. indexes were already becoming too extended from their moving averages. Therefore, a pullback at this point represents healthy action. When major market rallies pause, they can offer the chance for leading stocks to form new potential buy points for investors.
Coronavirus Correction Amid Current Market Rally
Most notably, tech stocks and chip stocks were hit hardest on Monday as their supply chains were among those most at risk. As such, the Nasdaq plunged 3.2% while the VanEck Vectors Semiconductor ETF (SMH), which measures the performance of chip stocks, dove 4.5%.
The Dow Jones industrials fell 3.55% and the S&P 500 sold off nearly 3.4%. Volume rose sharply on both major exchanges vs. the close on Friday — a bearish sign.
Both the S&P 500 and the Dow Jones closed below their 50-day moving averages. The Nasdaq closed just barely below its 50-day line and is currently seeking support at that level. Monday's drop comes just after the Nasdaq composite and S&P 500 hit record highs last week.
Among exchange traded funds, the Innovator IBD 50 (FFTY) closed down nearly 3% Monday. The growth-focused ETF also hit a new 52-week high last week and was up over 6% for 2020 before Monday's drop.
Dow Jones Stocks Sell Off Due To Coronavirus
All 30 of the Dow Jones components closed in the negative on Monday, including Apple (AAPL) and UnitedHealth Group (UNH).
Apple closed down 4.3% on heightened coronavirus fears, as the Dow giant remains heavily exposed to impacts of the coronavirus on its supply chains in China and elsewhere in Asia. Shares of Apple are currently below the 10-week line.
Apple stock is four weeks into a possible flat base, which needs a full five weeks to become valid. Apple stock would have a 327.95 buy point if it holds in its current range through the end of the week. However, if Apple stock closes below its 10-week line at the end of the week, such a decisive break would serve as a sell signal.
Elsewhere in the Dow, UnitedHealth plunged over 7%, its worst day in nearly 9 years.
In addition to negative coronavirus news, shares of UnitedHealth were greatly impacted by the narrative surrounding the potential Bernie Sanders nomination, following the senator's Saturday win in Nevada and prior win in New Hampshire. Sanders proposes expanding government management of health care, which could hurt private health insurers. Managed care providers, down nearly 7%, were among the worst performers among the 197 IBD-tracked industry groups.
UnitedHealth stock has fallen below its 50-day line in heavy volume, which is a red flag, if not a sell signal for the stock.
Chip and Energy Stocks Sink, Gold Swims
The gold sector was among the best performing sectors in the stock market today, while travel, tech and energy stocks were among the worst performers.
The VanEck Vectors Gold Miners (GDX) fund was up nearly 1.25% to 31.03 on Monday. The ETF rallied into a 5% buy zone last week above a key 29.97 buy point. The gold ETF's rally came after a strong bounce higher from it's 50-day line.
Chip stocks like Nvidia (NVDA) and Advanced Micro Devices (AMD) closed sharply lower Monday, down 7% and 7.5% respectively.
Nvidia stock slid 7%. Shares of Nvidia still remain a comfortable 7% above the 10-week moving average, after surging more than 15% on earnings the week before last.
Follow Fox on Twitter at @foxonstocks for more market insight.
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