What changed from yesterday’s strong showing to today’s awful performance?  We are starting to see the negative effects of central bank interest rate increases downstream as well as the recent hawkish comments from various Fed officials. We are hearing similar comments from the heads of central banks in the E.U., England and Canada. It should be reiterated that nothing ends bull markets like higher interest rates going into a slowing economy.

Today was a down day for all of the major indices: The DOW lost 167 points, the S&P 500 dropped 20, and the NASDAQ plummeted 90 points or nearly 1.5%. The DOW actually began higher with a gain of 33 points on the strength in banks due to the passing of stress tests from the Fed. These passing grades could allow them to raise interest rates with greater ease. In addition, the energy stocks went a little higher for the sixth straight day of higher crude prices, now up to $44.87.

The NASDAQ never had a chance in today’s session, as it opened lower by 17 points after yesterday’s best showing of the year. It cratered down to a huge decline of 147 at 1:30 PM, at which time the DOW also collapsed to a 257 point shellacking. From these low points, they stabilized as they headed into the closing bell.

Breadth numbers were very negative at a 1 to 4 downside ratio. The VIX made massive gains to as high as 15 on the panic selling…but calmed down to close at 11.44 today.

Bond yields were up to 2.27%, an astounding rise from Monday when it was at a yearly low of 2.13%. The Euro was up to 1.143 for the highest price in more than a year. The Japanese yen weakened at 111.9. Gold was a little lower at $1,247 showing its upside is limited due to the higher interest rates that have appeared this week. Crude oil enjoyed its sixth straight daily gain.

This was the third straight day for the NASDAQ to move in excess of 1%…one higher and two lower. It may not rise up to 6198 tomorrow which would mean that its seven-month consecutive winning streak is about to come to an end.

Donald M. Selkin,

Chief Market Strategist

These are excerpts from Don Selkin’s Daily Market Notes, abbreviated and updated with permission from the author. Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning.  The commentary provided in this Market Letter is intended to provide timely market analysis and should not be considered a research report.  This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analyses concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, Recommendations regarding increasing or decreasing holdings in particular industries or securities.  This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm.  This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author.  These news sources include the following: Bloomberg Financial, Reuters, and the Associated Press.