Stocks in US sink below key support points

US STOCKS fell yesterday and the S&P 500 closed below a key technical level after disappointing forecasts from eBay and other firms, casting doubt on the market’s recent strength.

The S&P 500 ended below its 50-day moving average of 1,543.04 for the first time this year, giving more weight to views that the recent rally is losing momentum, particularly after two days of sharp declines earlier this week. The Nasdaq 100 and the Russell 2000 indexes both have closed below their 50-day averages this week, adding to the overall technical pressure on the market.

Technology led the day’s fall. Shares of eBay dropped 5.9 per cent to $52.82, a day after the e-commerce company posted results and gave a disappointing earnings forecast for the second quarter. The S&P technology sector index shed 1.4 per cent.

The CBOE Volatility Index, Wall Street’s fear index, gained 6.4 per cent to 17.56. The VIX is up roughly 46 per cent for the week so far. It still remains well below its recent highs, but the gains could signal a change in the market trend.

Stocks have rallied for much of the year on views that the US economy is strengthening and the Federal Reserve will keep its stimulus in place. More recent data on the economy has been less upbeat. On Wednesday, reports showed factory activity in the Mid-Atlantic region cooled in April and the index of leading indicators, a gauge of future US economic activity, fell in March for the first time in seven months.

The Dow Jones industrial average slid 81.45 points, or 0.56 per cent, to end at 14,537.14. The Standard & Poor’s 500 Index dropped 10.40 points, or 0.67 per cent, to 1,541.61. The Nasdaq Composite Index fell 38.31 points, or 1.20 per cent, to close at 3,166.36.