Major market indices enter bear market territory as stocks fall Wednesday. The Dow ($INDU) gave up 166.75 points Wednesday to close the session at 11,215.51. The S&P 500 ($SPX) fell 23.39 points to 1,261.52. The Nasdaq ($COMPQ) lost 53.51 points to 2,251.46. Volume was moderate on the session with 1.52 billion shares traded on the NYSE and 2.42 billion shares exchanged on the Naz. Market breadth was negative by an 8-to-23 and 8-to-21 margin on the Big Board and Naz respectively.

Both the Dow and Naz officially entered bear market territory Wednesday, closing 20 percent below their October highs. The SPX is now just 10 points away from this decline as well. Wednesday’s losses came as oil prices moved to record highs and traders got disappointing news dealing with the jobs market. Merrill Lynch (MER) was in the spotlight for several reasons as well, along with Yahoo and Microsoft (MSFT).

MER shares fell 3.4 percent Wednesday to a price of $31.15 after Oppenheimer stated the financial giant could see write-downs of nearly $6 billion in the second quarter. Merrill was played a part in GM’s 15.1 percent decline Wednesday. GM was downgraded at Merrill and analysts cut its price target to $7 a share. GM shares closed Wednesday at $9.98 with Merrill also saying GM would need to raised $15 billion in cash liquidity.

MSFT shares fell 3.7 percent today on news the company is looking for a partner to help it purchase YHOO. MSFT has reportedly talked to News Corp (NWS) and Time Warner (TWX) about combining to buy YHOO. Microsoft would like to purchase Yahoo’s search business with another firm buying the rest of Yahoo’s assets. Shares of YHOO rose 3.4 percent to $20.88. YHOO recently rejected a $47.5 billion offer from Microsoft.

Oil prices hit a high of $144.15 before closing with a gain of $2.60 a barrel to $143.57. Crude inventory levels fell by 2.0 million barrels for the week ending June 27. In the past year, demand has fallen 1.7 percent, yet prices remain at record levels and this is a huge concern for the Fed and traders alike.

In economic news, the ADP Employment report showed a decline of 79,000 nonfarm private payrolls in June. This was much worse than expected, lowering expectations for Thursday’s payrolls report. However, data on factory orders was solid, rising 0.6 percent. This, along with a better than expected ISM Mfg. Survey, has helped alleviate some concerns about the manufacturing sector.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site