Stock market, after worst rout since February, shifts between small gains and losses

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October 11, 2018 2:49 pm Published by

U.S. stocks appear to be taking a breather in early trading Thursday, vacillating between positive and negative territory after the market’s biggest rout since February the previous day.

That drop in U.S. stocks was followed by sizable losses in Asian and European markets overnight, as they reacted to fears of slowing growth caused by higher interest rates and trade tensions.

In Thursday morning trading on Wall Street, the Dow Jones industrial stabilized. The blue-chip average was off 74 points, or 0.29 percent, after plunging more than 800 points Wednesday.

After the midweek rout, Wall Street pros are debating whether the current slide is signaling more severe problems for a bull market that is more than nine years old.

Citing a still low chance of recession in the U.S., the current swoon is more likely just a “correction” — or short-term pause — in an ongoing bull market, says Hugh Johnson, chief investment officer at Hugh Johnson Advisors, a money-management firm in Albany, NY. 

Wall Street pros will be watching a few key things today:

Will bargain hunters step in?

Investors will be looking for signs of stabilization in the form of investors swooping in to buy stocks at lower prices after Wednesday’s major drop. Following the 20 daily declines of more than 3 percent for the Standard & Poor’s 500 dating back to 1950, the closely watched index has been up an average of 1.3 percent five days later. And it’s been up 1.7 percent a month later, according to data from Strategas Research Partners.

Key level on S&P 500

The long upward trend of the the S&P 500 has not yet been broken. But there’s a chance of that happening. The large-company stock index closed at 2785.68 Wednesday, slightly above its long-term trend line, or average price over the past 200 trading days. If the index can remain above its so-called 200-day moving average of 2766, that would be a positive sign and create support for the market.

Behavior of technology stocks 

Tech stocks, the longtime market leaders, suffered the biggest declines yesterday — and Wall Street will be watching to see if they can rebound or at least show signs of stabilization. The Nasdaq composite, which is packed with tech stocks, tumbled 4.1 percent Wednesday. And well-known companies like Amazon, which fell 6.2 percent, Netflix, off 8.4 percent, and Apple, down 4.6 percent, got hit hard. 

“It wouldn’t be a big surprise if those pull back, but the rest of the market should be okay,” said Chris Cook, founder and president of Beacon Capital Management.

In early trading, Amazon was off 1.93 percent, Apple was 0.13 percent lower. Netflix was up 0.24 percent.

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Investors also got some good news on the economy early Thursday. An inflation reading on U.S. consumer prices in September came in lower than expected at 0.1 percent, which suggested that inflationary pressures are not ramping up.

Contributing: Janna Herron

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