Triple-digit losses for the
. Decade lows for
. A tech sector in disarray. It added up to the worst weekly performance for the major indices since August 2004.
Just as the market entered what should have been a redemptive earnings season, evidence of slower economic growth, oil's bite, and disappointing tech earnings pulled the carpet from under investors' feet.
A sharp downturn on Friday marked the third selloff session in a row for stocks and was indicative of the overall mood. Market nervousness ahead of the weekend was palpable, with the CBOE's volatility index soaring 16.6% to close at 16.65, flying by its previous upside resistance level at 14.50
In the footsteps of
profit-warning Thursday, the market was greeted with evidence of a regional economic slowdown in the Northeast, rising import prices and waning confidence.
Most economists, until this week, were calling for slower growth in the second half, as the U.S. economy prepared for a Greenspan-engineered soft landing. But those calls, it seems, had not fully taken into account the surging price of oil, which worsened an already huge trade deficit, weakened consumer sentiment and crimped retail sales and earnings.
For the week, the
Dow Jones Industrial Average
hemorrhaged 372 points, or 3.5%, to end at 10,089, a five-month low. Between Wednesday and Friday, the blue-chip average lost more than 400 points, or 4%, including a 198-point hammering on Friday, its worst single-day point decline since March 2003.
fell 3.2% for the week, losing 1.6% on Friday, to end at 1143, also a four-month low and far below its key resistance level at 1150. The
lost 90 points, or 4.5%, this week, to end at 1909, a six-month low.
Even with all the doom and gloom, there's little talk of an impending oversold bounce. The trend remains assuredly to the downside.
"These are disconcerting signs for the bulls," says Joe Sunderman, director of trading at Schaeffer Research. "We were just starting off the earnings season, and obviously we're not starting on the right foot."
Amid evidence of slowing growth, investors rotated out of cyclical stocks. As oil prices continued to slide, energy issues and other cyclicals were shunned. If you were looking for a safe haven, health care and biotech issues were it. The S&P healthcare index gained 1.1% during the week.
shares gained on the meager strength of in-line first-quarter earnings, released Tuesday.
There was little respite elsewhere, however, as major tech players sent paranoia through the system amid heightened fears of a slowdown in business spending.
IBM provided the biggest shock, posting unexpectedly early and unexpectedly bad results Thursday after the close.
likewise spooked the markets with bad results. The same day,
-- the world's biggest chip-equipment maker -- issued a profit warning and the Semiconductor Equipment Association said semiconductor gear sales dropped for the first time in almost two years.
When the future's uncertain, it's hard to focus on anything positive. Even
shares were shunned before and after the computer and Ipod maker posted stellar earnings on Wednesday. Similarly,
solid earnings did little to lift overall sentiment.
"If we see oil prices continuing to slide and perhaps some decent earnings next week, then we could see a turnaround on Monday. But momentum to the downside is very strong," cautions Schaeffers' Sunderman, who's been short- and long-term bearish for quite some time.
Oil did continue to slide this week, edging towards the key $50 per barrel level, in Nymex trading. Crude for May delivery have fallen about 13% from record highs of above $57 a barrel two weeks ago.
It did little to relieve investors, who got to witness the impact on bottom-lines of rising energy costs during the first three months of the year.
joined the growing bandwagon of companies reporting and lowering forecasts due to high oil prices.
Underneath it all was a slew of weaker-than-expected economic indications that bore witness to oil's bite. The trade deficit widened to a record monthly high of $61 billion in February, from an upwardly revised $58.5 billion in January, and above forecasts for a rise to $59 billion.
Retail sales, meanwhile, rose just 0.3% in March, below forecasts for sales to rise 0.8%. Excluding autos, sales only increased 0.1%, compared with expectations for a 0.5% gain.
Based on those two indicators, most economists revised their growth forecasts downward. Merrill Lynch, for one, trimmed its first-quarter growth forecasts to 3.5% from 4.3%. As for the second quarter, Merrill now expects growth of 3.2% instead of 3.5%.
In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send