DOW - Sharp pullback. Reversal?

Dow

11,823.70

-166.13

-1.39%

By: Abby Schultz, JeeYeon Park

Stocks closed near session lows as civil unrest in Egypt sparked widespread selling that pushed the S&P 500 down nearly 2 percent and broke an eight-week winning streak for the Dow.

The Dow Jones Industrial Average fell 166.13 points, or 1.39 percent on Friday, to close at 11,823.70. For the week, the Dow fell 48.14 points, or 0.41 percent, snapping an eight-week winning streak.


The blue-chip index touched 12,000 at the beginning of the session after closing just shy of that benchmark for Wednesday and Thursday this week. The last time the market closed above 12,000 was June 19, 2008

The S&P 500 fell 23.20 points, or 1.8 percent, to close at 1,276.34. For the week, the broad market index declined 7.01 points or 0.55 percent.


The S&P 500's close below 1,280.26 means it ended below the prior eleven closes, which is a bearish sign, Rick Bensignor, market strategist at Dahlman Rose, said in a note to clients Friday.

The S&P 500 had hit 1,300 earlier in the session, before the sell-off. The last time the S&P 500 closed above that benchmark was Aug. 28, 2008.

The Nasdaq declined 68.22 points, or 2.5 percent, to close at 2,687.06. For the week, the Nasdaq fell 2.48 points, or 0.09 percent.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, skyrocketed to nearly 24 percent, to more than 20. It was biggest daily spike in the VIX since June 4.

All key S&P 500 sectors sank, led by consumer discretionary, technology and telecom.

Stocks slumped as the protests in Egypt raised concerns the government was losing control, which would lead to instability in the region. The news was roiling markets worldwide.

The uncertainty surrounding the events also gave investors a reason to sell after five months of solid gains, and as the Dow and S&P bumped up against key thresholds, analysts said.

That and weak earnings news out of Amazon.com, Ford and Microsoft, provided another catalyst for investors to sell, said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research.

The selling—which came from big institutions—was taking place amid significant volume, indicating more conviction in the moves, Detrick said.

"Egypt is definitely at the forefront today," agreed Paul Brigandi, senior vice president of portfolio management at Direxion Funds/Direxion Shares. "Overall, political unrest is never good for the market, especially when it has to do with the Middle East."

But the events in Egypt hit at a time when the market was bumping up against psychologically important benchmarks, and was beginning to "look fatigued" after rallying for some eight or nine weeks, said Brigandi, noting that the S&P 500 had been up 3 percent so far this year on top of a nearly 13 percent gain in 2010.