(Bloomberg) -- Four weeks of violent price action has left American equity benchmarks close to some unwelcome milestones.
Take the S&P 500 Index, whose 23-point retreat Thursday sent it below its average price the for the past 50 days for the first time since May. The index suffered its worst decline in almost two months as yield-sensitive shares tumbled. The Russell 2000 Index followed suit, testing the same support level.
While there's nothing magical about lines on charts, and stocks have a habit of bouncing after dips, the clustering of noticeable levels is adding to anxiety in an already worried market. The Nasdaq 100 Index closed below its own 50-day average last week for the first time in seven months, with losses widening since then.
“The fact that a number of indexes are flirting with their support levels tells there is a lack of confidence in the markets,” Ilya Feygin, senior strategist at WallachBeth Capital, said. “Between the uncertainty connected with the central banks in the U.S. and Europe, between the Trump-related uncertainty, lack of strong economic data, there is a chance the selloff will continue into next week.”
The selling Thursday came as central banks in the U.S., Europe and Asia have struck a more hawkish tone as they seek to remove nearly a decade of accommodation. Investors will scrutinize U.S. jobs data Friday to see if recent signs of slowing growth persist. Since Donald Trump's election in November, the S&P 500 has fallen only once when jobs data was reported, adding 0.3 percent on average.
The S&P closed at 2,409.75 Thursday, just above the 2,400 level that some analysts say is technically significant. The index traded above that round-number milestone for more than six weeks. The CBOE Volatility Index rose 13 percent Thursday to end at the highest since May 18.
“The 2,400 level for the S&P is an important psychological level,” said Feygin. “We breach this level, and we see potentially a wider selloff, more hedging and a spike in VIX.”
The Nasdaq 100 Index will also be looking to rebound from a dive Thursday that sent it lower by 0.9 percent to widen its loss from June 8 to almost 5 percent. The gauge of tech megacaps fell as low as 5,579.64, bouncing after it touched its May 17 closing level to finsih at 5,597.90.
That May close demarcates the end of a selloff triggered by a series of damaging revelations surrounding Trump's dealings with Russia and top U.S. intelligence officials. The average stock in the Nasdaq 100 Index is now hovering about 12 percent below its 52-week high, while 15 percent are in bear market declines of 20 percent or more.
“The Nasdaq has taken out its 50-day and is approaching that May low but it's already oversold from a short-term perspective,” Katie Stockton, managing director and chief technical strategist at BTIG LLC, said by phone. “The rotation out of tech into financials and industrials has helped the S&P 500. The next step is to look for an uptick in momentum in the Nasdaq.”
To contact the reporters on this story: Elena Popina in New York at epopina@bloomberg.net, Oliver Renick in New York at orenick2@bloomberg.net, Lu Wang in New York at lwang8@bloomberg.net.
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris Nagi
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