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Wall Street closes in red despite a late rebound

  • Energy loses more than 2.5% on Tuesday.
  • Industrials & materials extend the slide.
  • Communication services turn green in the second half of the session.

Major equity indexes in the U.S. opened the day sharply lower as the heavy losses seen in global equity indexes weighed on the market sentiment. After losing over 2% during the first trading hours of the session, the indexes staged a strong recovery in the second half but failed to move into the positive territory.

Another sell-off seen in crude oil prices after Saudi oil minister hinted at the possibility of increasing their output to counter any potential shortages amid falling Iranian exports dragged the S&P 500 Energy Sector, which closed the day with a loss of 2.67%. The barrel of West Texas Intermediate settled at its lowest level in more than two months at $66.43 on Tuesday.

Additionally, the dismal global economic outlook hurt the S&P 500 Industrials and Materials indexes and forced them to finish the day 1.6% and 1.14% lower, respectively. Commenting on today’s market action,  “There was a lot of early morning fear, and when the market didn’t accelerate further to the downside, you saw some people coming in to pick up some stocks.  The companies that disappointed tended to be in the industrial sector, and there are a wide range of companies reporting,”  Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey, told Reuters.

On a positive note, the S&P 500 Communication Services sector moved into the positive territory to end the day 0.4% higher ahead of this week’s critical earnings reports from Amazon and Google.  

The Dow Jones Industrial Average erased 125.98 points, or 0.5%, to 25,191.43, the S&P 500 fell 15.19 points, or 0.55%, to 2,740.69 and the Nasdaq Composite lost 31.09 points, or 0.42%, to 7,437.54.

DJIA technical outlook by FXStreet Chief Analyst Valeria Bednarik

The Dow reversed most of an over 500 points slump, still down for the day but up from an intraday low of 24,746, a level last seen early July. The daily chart for the index shows that it tested levels below a horizontal 200 DMA,  but the impressive comeback fell short of changing the negative tone of the index, as it remains far below a firmly bearish 20 DMA, also below the 100 DMA. Additionally, technical indicators in the mentioned chart maintain their bearish slopes near oversold readings, with no signs of changing course.

Shorter term, and according to the 4 hours chart, the upside potential seems limited as the index stalled its late recovery below its 20 SMA, while technical indicators have pared their advances below their midlines.

Support levels: 25,174 – 25,122 – 25,068.

Resistance levels: 25,303 – 25,362 – 25,421.

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