Dow Jones Falls Over 750 Points As Energy Stocks Lead Downside

The Nasdaq composite led the downside in today’s market, while the Dow Jones and S&P 500 traded well over 2% lower. Stocks gapped down to new lows on Monday after last week’s consumer price index report showed a decades-high print on inflation. Investors anticipate this may cause the Federal Reserve to hike rates even more aggressively than previously anticipated.

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Dow Jones Today

The Dow Jones Industrial Average fell 750 points, down 2.2% in midday trading. Meanwhile, the S&P 500 fell 3.1%. Small caps struggled badly as the Russell 2000 was down 4.3%. The tech-heavy Nasdaq composite saw a 3.8% decline, after weekly losses of 5.6% last week sent it back near lows for the year. Volume was strongly higher on the Nasdaq and on the NYSE vs. the same time on Thursday.

Stocks sold off again Monday after closing last week with a big loss. The Dow Jones and other major U.S. indexes all continued below their 21-day exponential moving averages on Monday, a bearish sign.

Investors will be turning their attention to the Fed policy meeting, which begins on Tuesday and concludes at 2 p.m. ET Wednesday with the Fed’s final decision on interest rates. The Fed is expected to raise its main borrowing rate by 50 basis points. This could be the first time since 1994 that the Fed hikes rates by 50 points multiple times in one year.

Other important economic events this week include retail sales, which will be announced Wednesday at 8:30 a.m. ET, and the Industrial Production Index, due Friday at 9:30 a.m. ET.

Outside Dow Jones: IBD 50 Stocks Plummet

The growth-focused IBD 50 ETF (FFTY) fell over 5.6% on Monday, as shares gapped down in above-average volume. The index was looking better earlier last week as shares reclaimed their 50-day line and 21-day line. But then shares gapped down multiple days in a row and closed last week with losses of over 5%.

All 50 stocks in the index traded lower on Monday. Many stocks in the energy space, including solar energy stocks, coal energy stocks and oil stocks, led the decline.

HighPeak Energy (HPK) and Earthstone Energy (ESTE) led the downside with losses of roughly 12% and 13%, respectively. Both are part of the U.S. oil and gas exploration and production industry group. Earthstone was well extended from a 15.37 buy point.

HighPeak was approaching a 38.31 buy point, but is now pulling back toward its 50-day line.

Solar Energy, Coal Energy Stocks Break Down

Enphase Energy (ENPH), a solar energy stock, scored a fresh breakout last week from a 193 double-bottom entry. But shares triggered the 7% sell rule on Monday after gapping lower and undercutting its 21-day, 50-day and 200-day lines. Shares of Enphase fell over 11% early Monday.

Fellow solar energy stock Daqo New Energy (DQ) also sold off heavily, down over 10%. After a powerful breakout last week put the stock in its 20% profit zone, Monday’s 10% sell-off places the stock back in the 5% buy zone from a 53.70 entry. Remember, buying stocks heading lower — especially in a weak market — is a risky move.

Two coal stocks also showed notable declines on Monday, Ramaco Resources (METC) and Arch Resources (ARCH). Both are part of the No. 1 ranked IBD coal energy industry group. Arch Resources lost over 7% while Ramaco fell nearly 10%.

Follow Rachel Fox on Twitter at @IBD_RFox for more Dow Jones and stock market commentary.

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