DOW Plunges 764 Points as Recession Fears Build

Markets continued to fall overnight, stemming from the Federal Open Market Committee (FOMC) meeting notes and Federal Reserve (Fed) Chairman Jerome Powell’s comments. 

To recap, the crucial moment that created this sentiment shift in the market came when the Fed stated further rate increases may be needed in 2023. Jerome Powell’s comments indicated the Fed isn’t committed to a pivot in the short term, and there would be no consideration of pausing rate hikes. 

Before more economic data hit the news, the S&P 500 futures were trading 40 points lower than yesterday’s close.

At 8:30 a.m. Eastern, retail sales data and Continuing and Initial Jobless Claims Reports were released. 

Negative economic data spooks market

Retail Sales had a median forecast of -0.3% for November, but the actual data indicated a more significant drop in retail sales than anticipated. When the release of -0.6% hit the market, the reaction caused even more selling across indices. Retail sales data is an important economic metric that serves as a barometer for future economic performance. When the average consumer spends less, it may be indicative of a contracting economy. This has a wide array of implications regarding both small and large businesses that drive the economy. Further signs markets may be bracing for a future recession.

Continuing and Initial Jobless Claims reports offered no consolation for market participants either, as both reported underwhelming numbers, dashing any hopes of improving market sentiment. The median forecast for initial jobless claims was lower than expected and revealed a figure of 211,000, lower than the forecasted 232,000. Continuing Jobless Claims came in at 1.67 million, the same as the previous month. After this information was digested, the market continued to sell off, falling an additional 10 points to set the tone for the day.

As the opening bell sounded, markets attempted to move higher but were met with heavy resistance. As selling pressure continued to mount, markets steadily moved lower, setting the tone for the entire session. Any buying pressure was modest and quickly overcome as bears maintained full control of price action today. 

One of the most significant and telling moments of a solid down day in the market was the inability of the bulls to defend the daily 21 exponential moving average (EMA) at 3,975. This level will need to be reclaimed for any serious momentum to build to the upside moving forward.

To begin power hour, the buying volume was finally enough to cause a 30-point bounce off the psychological level of 3,900 on the S&P 500 futures. 

Moving into Friday, using this 3,900 level as a line in the sand will be helpful. If buyers cannot support this level overnight or into tomorrow’s session, the sellers will continue to have firm market control. 

Markets close in sea of red

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 futures closed down 2.75%, losing 110 points, while the Nasdaq futures closed down 3.57%, a decrease of 424 points. The Dow Jones futures followed, closing down 2.54%, falling 764 points.