Meidell: Nosedive punctuates market’s instability

The rebound rally on Monday had the potential to stop cold and reverse the stock market sell-off we saw last Friday. However, after Tuesday’s nosedive, it’s clear that investors are not ready to put this consolidation period behind them just yet. Instead, the stock market is behaving more like someone who just woke up from a deep sleep and is still floundering around trying to get its bearings. By the closing bell, the Standard & Poor’s 500 had fallen 1.48 percent and the Nasdaq Composite was lower by 1.09 percent.

One thing I like to look at during sell-offs like this is areas of the market that are making new lows versus those that aren’t. This can be a barometer of sorts that tells us which areas of the market investors are more confident in than others as they attempt to weather the storm. On Tuesday, it was clear that the technology sector was one of those favored areas with investors, as the Dow Jones U.S. Technology index declined 0.65 percent, much less than the major market averages, and the tech-heavy Nasdaq 100 index was down only 0.88 percent.

Typically during market declines, investors will shift to more defensive shares such as utilities, real estate and consumer staples. However, this time around those types of shares are fighting the headwind caused by an expectation the Fed will raise interest rates before year’s end. Falling crude oil prices and rising interest rates on Tuesday also cast a shadow over the stock market, as the S&P GSCI Crude Oil index fell roughly 2.5 percent and the Barclay’s 20+ Year U.S. Treasury Bond index declined 1.14 percent on the day.

Though three Fed officials spoke on Monday, attempting to reassure investors there would be no interest-rate increase this month, some investors appear to be waiting to hear it from Janet Yellen after the Federal Open Market Committee meets next week.

This week, the top-performing sectors are led by the Dow Jones U.S. Healthcare index, down 1.65 percent over the past five trading days, followed by the Dow Jones U.S. Telecommunications index, down 1.78 percent over the same period.