Dow Jones: Goldman’s $30 Drop Turns Into a 500-Point Dow Selloff

Dow Falls 500 as Goldman Does the Damage

The Dow has the wrong stocks for this market. The Nasdaq got an AI bounce Tuesday with Nvidia, Micron, Intel and AMD all higher after Monday’s selloff. That kept the tech-heavy indexes from falling apart. It did nothing for the blue chips. Goldman Sachs, American Express, Home Depot, UnitedHealth and Amazon were dragging the Dow lower while the rest of the market found its footing. Twenty-seven of 30 Dow components were in the red.

At 16:43 GMT, the Dow Jones Industrial Average is trading 52,001.08, down 420.12 or 0.80%. The index fell as much as 528 points earlier in the session.

Daily Dow Jones Industrial Average (DJI) Technical Analysis

The Dow Jones Industrial Average is sharply lower at mid-session on Tuesday. The main trend is down according to the daily swing chart. A trade through 52750.88 will change the main trend to up. The downtrend was reaffirmed earlier today when sellers took out the last swing bottom at 51962.71.

The Dow is also trading on the bearish side of the 50-day moving average, strengthening the case for the downtrend on the daily swing chart.

The market is currently trading on the weak side of an intermediate 50% level at 52326.70, making it a potential resistance level along with a retracement zone at 52765.33 to 53143.20.

The next downside targets are the intermediate 61.8% level at 51756.14 and the July 23 main bottom at 51542.06.

Goldman Turned a Bad Day Into a 500-Point Decline

Goldman Sachs was down more than $30 around midday. At 5.94 index points per dollar move, Goldman alone was taking roughly 180 points out of the average. That turned what would have been a broad pullback into a 500-point headline.

American Express lost about 1.7%. Home Depot, UnitedHealth and Amazon dropped between 1.5% and 1.7%. Microsoft, Apple, Amgen and Disney were all lower. This was not a narrow financial-sector selloff. The damage ran through consumer, healthcare, industrial and technology names across the index.

Chevron caught a bid from higher crude and Travelers was slightly positive. Neither gain made a dent against the losses in the high-priced names. The Dow had no counterweight Tuesday and that is the problem when the heaviest stocks in the index are the ones getting hit hardest.

The 10-Year at 5% Is the Reason

The 10-year Treasury yield hit 5.041% Tuesday, highest since 2007. It pulled back slightly but stayed near 5% after rising more than four basis points on the day. Bond traders are not waiting for the Fed. They are already selling Treasuries and demanding more compensation for inflation and for holding government debt.

Stocks are now competing against a yield that was below 4% not long ago. The Nasdaq can get by on a handful of chip names catching a bid. The Dow needs Goldman, UnitedHealth, Home Depot and the high-priced industrials to participate. At 5% on the 10-year, those are exactly the names getting hit. The index was built for a different rate environment and it is paying for that mismatch Tuesday.

Oil Above $100 Is Making Wednesday Harder

WTI was above $105 and Brent above $108 after the Saudi pipeline outage and disrupted Hormuz shipping kept the crude supply story tight. The oil rally is feeding inflation expectations into a Fed meeting that starts in less than 24 hours.

A quarter-point hike is already the base case. The bigger question for the Dow is whether Warsh treats this as the last move or leaves December on the table. The Dow’s most rate-sensitive stocks need Warsh to sound finished. Goldman cannot repair the damage as long as bond traders keep pricing in more tightening. Oil above $100 makes it harder for Warsh to give the market what it needs to hear.

Stocks in the News

Nvidia gained about 1%. Micron and Intel rose nearly 2%. AMD added roughly 3%. The AI bounce that Monday’s selling set up arrived Tuesday but it landed in the Nasdaq, not the Dow. Microsoft, Apple and Amazon are Dow components and all three were lower. The group catching bids is not the group carrying the blue-chip average. That is why the Dow is telling a more bearish story than the S&P 500 or Nasdaq numbers suggest.

What to Watch

The Dow is not going to recover while the 10-year sits near 5%. That is the math. Goldman alone took 180 points out of the index Tuesday and the rest of the high-priced names piled on. Those stocks do not stabilize at these yield levels. They need Warsh to sound finished Wednesday afternoon. Anything that keeps December in play keeps bond sellers active and leaves the Dow exposed as the weakest of the three major averages heading into Thursday.

The bias leans bearish with the main trend down and the Dow trading below its 50-day moving average. Tuesday’s selling reaffirmed the downtrend at 51962.71. The targets below are 51756.14 and the July 23 bottom at 51542.06. That bottom is the trigger level. A break through it with volume opens the path toward the 200-day moving average at 50039.28 and that is a long way down from here. Resistance sits at 52326.70 and the retracement zone at 52765.33 to 53143.20. The trend does not change to up until 52750.88 is taken out.

More Information in our Economic Calendar.