DOW - Stocks Plunge Amid Widespread Global Jitters

Dow

11,984.61

-228.48

-1.87%

By: Abby Schultz, JeeYeon Park

Stocks closed near session lows, and below psychologically important levels, as global worries triggered by European sovereign debt and a slowing in Chinese growth escalated after news of violence against protesters in Saudia Arabia.

The Dow Jones Industrial Average plunged 228.48 points, or 1.87 percent, to close at 11,984.61, falling through the 12,000 benchmark, in the biggest drop for the blue-chip index since Aug. 11, 2010. Intraday, the Dow fell below its 50-day moving average of 11,980.72.


The S&P 500 tumbled 24.91 points, or 1.9 percent, to close at 1,295.11, below its 50-day moving average of 1,300.13. It was the biggest drop for the broad market index since Feb. 22.


The tech-heavy Nasdaq plunged 50.70 points, or 1.84 percent, to close at 2,701.02.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose more than 8 percent to 21.88.

The fact the VIX didn't spike higher despite the nearly 2 percent downdraft in stocks is surprising, said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research.


"It's the options markets way of saying, we’re not really panicking on this," Detrick said.

Detrick noted the 200-day moving average for the VIX is 21.92, and that at current levels, the VIX appears to be bumping up against—but not breaking through—that resistance level. "It could usher in a good buying opportunity," he said.

At the start of the session, investors were shaken by Moody’s downgrade of Spain's rating and from news out of China of a surprise trade deficit of $7.3 billion in February—the largest gap in seven years—and its first since March 2010. The unexpected news of a deficit sparked fear of a global slowdown that affected oil as well as other commodity prices.


"It looks like the slowdown scenario is picking up steam based on the Chinese trade numbers," Andrew Brenner at Guggenheim Securities wrote in a note to clients this morning.

Concerns over the unexpected Chinese trade deficit—a fact that would allow the Chinese government to keep the value of the yuan in check—are hurting materials and energy stocks, which depend on a growing Chinese economy, said Marc Pado, U.S. market strategist and technical analyst at Cantor Fitzgerald.