The S&P 500 dropped for a second day and closed below its 200-day moving average for the first time in five months. The moving average is a measure of the market’s long-term trend, and a significant break through that level would be seen as a sign of weakness. Just minutes before the closing bell, stocks accelerated their declines and the S&P 500 fell more than 1 percent.
McDonald’s shares fell 2 per cent to $85.13 after the world’s largest hamburger chain reported its first monthly drop in global sales since March 2003. The stock’s weakness hurt the Dow, which fell through its 200-day moving average on Wednesday.
“Most of the major indices are busting below or challenging those trendlines. Typically those offer pretty strong support, and I would be surprised to see the S&P 500 fall like a knife through here,” said Bruce Zaro, chief technical strategist at Delta Global Asset Management, in Boston.
Apple shares sank for a second day. The stock fell 3.6 per cent to $537.75 and is down more than 20 per cent from its 21 September all-time intraday high of $705.07.
The Dow Jones industrial average lost 121.41 points, or 0.94 per cent, to 12,811.32 at the close. The Standard & Poor’s 500 Index fell 17.02 points, or 1.22 per cent, to 1,377.51, ending at its lowest level since 2 August. The Nasdaq Composite Index dropped 41.70 points, or 1.42 per cent, to close at 2,895.58.
A comprehensive agreement to avoid the automatic spending cuts and tax increases of the "fiscal cliff" was possible, a more likely scenario is for political leaders to find a temporary fix to buy time until the new Congress and Obama are sworn in, which will occur in January.