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Dow falls for a sixth straight day after another wild session

The Dow Jones Industrial Average dropped 250 points, and the S&P 500 fell 0.7 percent and hit a new low for the year. Meanwhile, the Nasdaq Composite slipped 0.7 percent.
A traders works on the floor of the New York Stock Exchange
A trader works on the floor of the New York Stock Exchange in New York on Thursday. Spencer Platt / Getty Images
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Stocks fell on Thursday as the market sell-off continued after another failed rebound attempt.

The Dow Jones Industrial Average dropped 250 points, or 0.8, falling for its sixth-straight day. The S&P 500 fell 0.7 percent and hit a new low for the year. The index was down 18.9 percent on an intraday basis and about 19 percent on a closing basis, and steered closer toward bear market territory. Meanwhile, the Nasdaq Composite slipped 0.7 percent as tech-heavy selling persisted after taking a short breath.

All the major averages closed the session on track for weekly losses.

Earlier in the session, the market tried to rebound as traders bought into beaten-down names. At one point, the Dow was up as much as 80 points at session highs, while the Nasdaq added 1.6 percent.

“Even if you say we’re in a bear market, there’s rallies within bear markets that can be very sharp,” said Truist’s Keith Lerner about the early market moves. “I think, at least short-term, and given how oversold we are and given that we’re starting to see people nibble at some of these areas that have been the most beaten up, I think that’s at least a silver lining in a sea of red and gloom over the last couple of days.”

Those gains slipped as the markets once again struggled to pick a direction and the S&P 500 was on the brink of bear market territory. Of the major averages, the Nasdaq is the only one in bear market territory, having fallen more than 30 percent from its record high — as tech shares continue to get pummeled.

“It’s my opinion that this is a market that’s trading on emotions and not rational logic,” Jim Lebenthal of Cerity Partners told CNBC’s “Halftime Report” on Thursday. “Every day for the last however many days, you get this pop in the morning, and then it dribbles off.”

Some heavily shorted names led the brief rally from earlier in the day and continued to trade higher. Shares of Lucid popped 13.2 percent while GameStop and AMC jumped more than 30 percent and 20 percent, before pulling back gains. Rivian Automotive also soared about 18 percent after reporting its latest quarterly results and Carvana, which hit a two-year low earlier in the session, surged more nearly 25 percent.

While it was unclear what was driving gains from Lucid, GameStop and AMC, it could mean a short squeeze was taking place, where hedge funds that have profited from the steep losses in overvalued pandemic winners this year were finally closing out their short positions by buying back the shares.

Short selling is a tactic where funds sell shares that are borrowed from investment banks and so in order to close the trade they need to buy the stocks and return them. A short squeeze is a rally that results from that buying.

To be sure, this trading action could indicate some investors who have made hefty bets on the beaten-up meme stocks are upping the ante in the hopes of winning big, said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

“I think it’s a desperate move, it’s a gambling move, it’s a lottery ticket hoping for a big payout and they may get lucky, but most likely, probably not,” he said. 

Apple lost 2.7 percent, pushing the shares into bear market territory — down 22 percent from a 52-week-high. It came as Saudi Aramco surpassed the tech giant as the world’s most valuable company on Wednesday. Meanwhile, shares of Amazon and Meta Platforms closed up more than 1 percent.

Disney shares fell to a two-year low and closed about 0.9 percent. The media giant reported higher-than-expected streaming subscriber growth, but warned about the Covid impact on parks in Asia.

These moves came as traders pored over the latest U.S. inflation data. Fresh producer price index data, which measures prices at the wholesale level, rose 11 percent year over year.

On Wednesday, the U.S. government posted the latest consumer price index reading, which showed an 8.3 percent year-over-year jump in April. That’s higher than what economists expected and close to a 40-year-high of 8.5 percent. The report caused investors to continue to sell risky assets like tech stocks.