Dow Loses 12,000, Stocks Fall to Five-Week Low

Well, that was refreshing wasnt it? To have stocks react to other tangible
things besides oil prices, things like global unrest and, lo and behold,
economic data! Now onto the ugliness of it all stocks plunged Thursday to their
lowest levels in more than five weeks as a glum session that started overseas
spread to U.S. equities. Even worse, perhaps, is the two big, round index
numbers that stocks fell below 12,000 on the Dow and 1300 on the S&P 500,
despite a valiant effort by traders to keep those levels. The Dow Jones
Industrial Average ended down 228 points to 11,984, the Nasdaq fell 51 points to
2701  and the S&P 500 lost 25 points to 1295. The Dows 228-point drop was its
biggest fall in five months. So, where to start with what happened after all,
investors have been trained in the past couple of weeks to look no further than
oil prices to see if it was a good or bad day for stocks. And on Thursday, oil
slid nearly 2% to get under $103 a barrel. Alas, the fix was already in from
abroad as investors woke to an unfortunate trinity: China reported a surprising
$7 billion trade deficit, Japan dropped its fourth-quarter GDP figure, and
Moodys downgraded Spains debt and issued a negative outlook. The upside: all
seemed to be well in the Dutch Antilles. All major overseas markets moved lower
in response to Chinas surprise $7 billion trade deficit, Japans downwardly
revised fourth quarter GDP figure, and Moodys decision to downgrade Spains debt
and issue a negative outlook. From that start greeting U.S. investors, it was
asking a lot to have them bid higher for stocks. But then you had reports of
protests in Saudi Arabia, and a report that weekly employment claims jumped
higher. Behind the headlines, however, is the continuing dynamic mentioned in
this space Wednesday: stocks are behaving like theyre on the other side of the
momentum they showed on the way up, when the push was largely supplied by Nasdaq
and small-cap stocks. The Nasdaq showed no particular underperformance on
Thursday, but the Russell 2000 fell 2.6%, and has now dropped 3% in two days. On
Wednesday, we mentioned Brigham Exploration (NASDAQ: BEXP ) a small-cap and
Nasdaq name that was having the good fortune of winning attention from investors
looking for small-cap plays as oil prices went through the roof. The stock is
now down more than 12% in March. And lets not forget that clearing away the
floor for stocks has been the diminished short interest, which had previously
helped provide a bid for stocks as they moved higher through the end of last
year. With shorts having capitulated, bulls are increasingly going it alone in
the market. With stocks (the S&P 500) now up only 3% in 2011, the road less
traveled may soon enough be the one occupied by market optimists.