The stock market continues to struggle, and yesterday was just the latest example of its run of recent difficulties. To wit, after the equity futures had sold off in the early pre-market hours, an upbeat earnings report from aerospace giant and Dow Jones Industrial Average component Boeing (BA – Free Boeing Stock Report), issued well before the market opened, turned the indicators around on a dime. And when live trading did resume, equities were up solidly. But this upturn was fleeting, and as we moved more deeply into through the morning, stocks turned lower again and did so rather aggressively.

Once again, it was the usual set of stories, headlined by weakness in the tech sector, problems in the euro zone (mostly focusing on Italy and that nation's budget spending), concerns with Saudi Arabia, worries about slowing worldwide economic growth, and falling stock markets globally that sent equities reeling in the early going. Then, there are the fast-approaching midterm elections, and the uncertainties engendered by those hard-fought contests. All of this is offsetting what generally has been a strong earnings season, with the Boeing profit data being just the latest example of that strong overall performance.

Of course, the earnings data includes more than just Boeing. And there also have been some disappointments. On point, erstwhile Dow component AT&T (T) also weighed in with its quarterly metrics. And here, the news was not good, and the issue fell more than 6% in the early going. Also, there is the economy, where recent issuances have been mixed, with slippage in the housing sector of some note. In that area, the day's releases included a report on September sales of new homes, which fell 5.5%, to an annualized rate of 553,000 homes. It was the fourth straight monthly decline. Clearly, higher mortgage rates are hurting.
     
That disappointing housing result obviously did not help sentiment. Still, as the morning ended, a vigorous comeback attempt would get under way, and as the afternoon began, the Dow's loss was almost erased. However, the selling would then resume, and rather quickly, and by 1:30 PM (EDT), the blue chip composite would again be off by some 250 points. Reflecting the strong selling in the tech-laden NASDAQ, though, that index's decline would be much more severe. The S&P 500's loss would be in between the other two composites in severity, as would the smaller-cap indexes, as the Street awaited the 2:00 PM Beige Book issuance.

The Beige Book, which is a release from the Federal Reserve and comes some two weeks ahead of the next FOMC meeting, noted that the nation's economy was continuing to expand at a modest to moderate pace, with a majority of the 12 Fed Districts reporting growth. Most individual categories also suggested solid gains, and there were labor shortages acknowledged. Real estate was mixed, meantime, and prices continued to rise. The market's initial response to this strong overall summation was negative, as the Dow's loss would quickly swell to some 300 points, hitting a low for the session to that point. 

Following that initial reaction, the equity market again would turn around, paring more than 50% of that 300-point deficit. But that respite was brief, and stocks would soon resume their fall. After that, the market would go back and forth, for a time, as has been its pattern, for the much of the remainder of the session, under pressure from myriad issues, the Beige Book being only one of them. It would seem that after months of rallying, even as most global markets slumped, there is no longer that decoupling, as our markets fade down below support levels.  

The final few minutes would then see further aggressive selling, bringing the NASDAQ down to a closing loss of 329 points, or more than 4%. The Dow, on that late collapse, would end lower by 608 points. Even larger percentage losses would be tallied by the S&P 500, the S&P 400, and the Russell 2000. Losing stocks, moreover, overwhelmed winning issues, and new 52-week lows swelled, as the various sectors suffered severe selling. Meantime, the VIX volatility index, or the so-called fear gauge, jumped by more than 20% on the day, while Treasury yields fell in a flight to quality.  

After that massive selling, we see that the markets in Asia were lower in the overnight hours, while in Europe, the bourses are now tracking with modest gains. Elsewhere, yields on Treasury issues are edging higher and oil prices, off yesterday, are little changed this morning. Meantime, signs now point to a strong start on Wall Street when the bulls and the bears meet at 9:30 AM (EDT) in what should be another volatile day of trading. Stay tuned.
 
- Harvey S. Katz, CFA
 
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.