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The market dropped for the second day in a row. The Dow is now barely above the psychologically important 12000 level and closed at the lowest level in three months. Unlike yesterday, there is little economic news. Several disappointing earnings reports along with a rise in crude price were cited as the main reasons behind today’s drop. On top of that, RBS told its clients to prepare for a crash in global stock and credit markets over the next three months. The bank warns that the S&P 500 is likely to drop more than 300 points by September. That certainly made investors more nervous about holding stocks.
Commodities were once again outperforming the broad market. The CRB commodity index climbed more than 1% and closed at a new high. On the losers’ list, we had names such as consumer cyclicals and technologies. Financials were hit hard most time of the day but were able to recover a little bit by the close. The US dollar continued to retreat as traders trimmed their bets on interest rate hikes by the Fed. Treasuries rallied across the board. The VIX index, which is usually used as a fear indicator, jumped 5% in today’s trading but it was still not high enough to trigger a capitulation rally. The market breath was decisively negative.
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