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A blow to the bulls: Key stock indexes fall through spring lows

How bad was it?

The U.S. stock market has suffered worse one-day losses since the spring sell-off began in late April, but Tuesday’s plunge was particularly disheartening to the bulls because they figured the market’s decline had run its course by early June.

Instead, fresh fears that the global economy could roll over in the second half of the year triggered heavy selling on Wall Street and abroad. Some of the selling may have been related to quarter-end portfolio shifts, but the bears had plenty of fundamental ammunition from the latest consumer confidence report, new data on China's economy and Europe's banking woes.

Just 284 stocks closed higher on the New York Stock Exchange, the smallest number since a mere 153 rose on May 20 -- the day of the infamous "flash crash."

Traderjune29 The Standard & Poor’s 500 index tumbled 33.33 points, or 3.1%, to 1,041.24, in the biggest one-day loss since it slumped 3.4% on June 4. Before that, the S&P had plummeted 3.9% on May 20.

But the index’s close of 1,041 on Tuesday was below the spring closing low of 1,050.47 on June 7.

That leaves the S&P down 14.5% from its spring peak of 1,217 reached April 23, and at its lowest level since Oct. 30.

Bullish analysts obviously had been hoping to see the market hold above its spring lows.

The Nasdaq composite also fell through its previous low, diving 85.47 points, or 3.9%, to 2,135.18. The spring closing low was 2,158 on June 9.

Likewise, the Russell 2,000 small-stock index hit a new closing low in the latest sell-off, plummeting 4% to 615.96. It’s now off 17% from its April peak.

The declines in all of the major indexes from their spring highs still are in the range of a classic market “correction,” or short-term pullback, within a bull market.

Wall Street considers a drop of 10% to 20% in major indexes to be a correction. A decline beyond 20% is considered the start of a new bear market.

Of course, you never know until after the fact whether a correction is just the first leg down in a new bear market.

That, once again, is the agonizing question for investors.

-- Tom Petruno

Photo: A trader sits after hours at the NYSE on Tuesday. Credit: Keith Bedford / EPA

 
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