Was Wednesday a Warning For the Markets?

Stocks took a hard fall on Wednesday after both of the day’s two economic reports turned out to be disappointing.

Both of Wednesday’s economic reports turned out to be duds. The March ADP National Employment Report was a big miss, with only 158,000 jobs added, compared with economists’ expectations of 200,000 new jobs. The March ISM Non-Manufacturing Index fell to 54.4 percent from February’s 56 percent.

As a result of the disappointing economic news, the Dow Jones Industrial Average (NYSEARCA:DIA) dropped 111 points, closing at 14,550 for a loss of 0.76 percent. The S&P 500 (NYSEARCA:SPY) sank 1.05 percent to close at 1553.69.

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The Nasdaq 100 (NASDAQ:QQQ) fell 0.91 percent, while the Russell 2000 (NYSEARCA:IWM) took the hardest fall with a loss of 1.67 percent.

In other major markets, oil (NYSEARCA:USO) was one of the biggest losers, sinking 2.57 percent to close at $33.76. On London’s ICE Futures Europe Exchange, May futures for Brent crude oil advanced by $3.41 (3.09 percent) to $107.12/bbl. (NYSEARCA:BNO).

April Gold Futures sank by $18.00 (1.14 percent) to $1,557.10 per ounce following Tuesday’s bearish report on the yellow metal from Société Générale (NYSEARCA:GLD). Transports were down, with the Dow Jones Transportation Index (NYSEARCA:IYT) losing 1.42 percent…

European markets saw red numbers everywhere, while Japan’s Nikkei 225 Stock Average jumped by nearly 3 percent. China was a tad in the red despite positive PMI data.

Technical indicators point to an overbought market with declining momentum near significant long-term resistance lines.  The S&P 500 MACD has now dipped below the signal line, suggesting a further decline.

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For the day, major sectors finished mostly in the red, with the energy and financial sectors taking the hardest hit as a result of the downbeat ISM data on both the manufacturing and service sectors.

Consumer Discretionary (NYSEARCA:XLY):  -0.92 percent

Technology  (NYSEARCA:XLK):  -0.79 percent

Industrials (NYSEARCA:XLI):  -0.61 percent

Materials (NYSEARCA:XLB):  -0.83 percent

Energy (NYSEARCA:XLE):  -1.92 percent

Financials (NYSEARCA:XLF):  -1.54 percent

Utilities (NYSEARCA:XLU):  -0.28 percent

Health Care (NYSEARCA:XLV):  -0.62 percent

Consumer Staples (NYSEARCA:XLP):  -1.05 percent

Thursday brings the U.S. Department of Labor’s weekly report on initial unemployment claims.

Bottom line: Wednesday’s downbeat economic reports gave investors a good scare as to what the budget sequester might have in store for the second quarter economy. 

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John Nyaradi is the author of The ETF Investing Premium Newsletter.

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