Expect to see some profit-taking for a bit, although if it stays as bad as today for several days in a row it may be time to step away. Sectors that have been leading the market higher led the decline today: the Philadelphia Stock Exchange Semiconductor Index lost 2.3% after gaining 19% since Aug. 1, while the Amex Airline Index dropped 4.6% after gaining 24.4% in that time. “A lot of the weakest sectors are the ones that made some of the biggest moves as well — so it does smell like profit-taking,” says Jim Paulsen, chief investment strategist at Wells Capital Management.
Brokerages were hit hard, with Goldman Sachs losing 4.2%; the big exchanges were lousy as well — NYSE Group fell 6.6%. Few sectors were spared, as even the oil stocks ended lower despite a 1% gain in crude-oil futures. Just three stocks from the Dow Jones Industrial Average ended the day higher, and only by a few pennies. The chief culprits in the Dow’s 158-point drop were Intel, which fell 2.6%; Boeing, which lost 2.7%; and Wal-Mart, which also dropped 2.7%.
Brett Steenbarger weighs in with a few thoughts on today’s declines in his Trader Feed blog. “It’s tempting to go bottom fishing when we see such weakness, but as long as large traders continue to hit bids rather than lift offers, this is (and has been so far today) a losing proposition,” he writes. “It’s when declines lose downside momentum that they offer superior returns–not when there is broad participation to the downside.”
Phil Davis, an amateur investor who contributes to Seeking Alpha, notes the dollar’s decline with some dismay. “While we were all out having turkey, the rest of the world took a long, hard look at our balance sheets and downgraded us,” he writes. “As our debt is looking riskier to foreigners, the rumors that the Fed will LOWER rates to boost a slowing economy make no sense at all to buyers of international paper (or to anyone who actually understands economics).”