The stock market blew its biggest lead since February 2016

What a whiff! After staging what was shaping up to be a healthy stock-market surge, equity-index benchmarks buckled Wednesday, ending squarely in the red and registering their worst reversal since February 2016.

The Dow Jones Industrial Average

DJIA, +0.07%

which briefly boasted a nearly 200-point gain, up 1%, erased all those gains—and then some—to end down 0.2% at 20,648.15. According to Dow Jones data, that reversal marked the largest blown lead for the market since Feb. 10, 2016 (see chart below which shows the day’s action, with the red line representing Tuesday’s close).

Source: FactSet

Dow’s brisk reversal

It was also the worst pivot lower for the SP 500 index

SPX, +0.19%

which was as high as 0.8%, but ended down 0.3% at 2,352.95, also in about 14 months.

Read: MarketWatch’s Market Snapshot column

Still, the tech-heavy Nasdaq Composite Index’s

COMP, +0.25%

retreat might be the most gutting. The gauge touched an all-time trading high of 5,936.39 and was on track to mark its 22nd closing record of 2017, up 0.6%, until things unraveled in the final hour or so of trading (see chart below).

Source: FactSet

Nasdaq goes from record to red.

What went so wrong, so fast after a better-than-expected reading of private-sector payrolls fueled early gains?

It’s hard to precisely pinpoint the cause but there are a number of factors that may have proved too much for those who wager on equities climbing ever higher and scoring fresh records.

Here are a few possible contributors:

  • President Donald Trump is slated to meet with his Chinese counterpart, Xi Jinping, in a closely watched two-day summit that could influence the relationship between the world’s largest economies amid growing tensions.
  • Heightened fears that tax reform, which had been at the heart of the recent rally in stocks, may take longer to implement than the market had previously anticipated. House Speaker Paul Ryan on Wednesday said tax reform could take longer than efforts to repeal and replace Obamacare, which have already badly stumbled out of the gate.
  • The Federal Reserve’s minutes, released at 2 p.m. Eastern, revealed talk by the central bank to reduce its $4.5 trillion balance sheet, accumulated to staunch the bleeding during the heart of the 2008-’09 financial crisis. Some market players viewed that as hawkish and not particularly supportive for stocks because shrinking the balance sheet can result in higher borrowing costs.
  • Trump talked tough during a news conference with the king of Jordan, hinting that the U.S. might be prepared to take action against Syrian leader Bashar al-Assad after an apparent chemical attack on civilians Tuesday left scores dead.

With Wednesday’s startling reverse, the SP 500 and the Dow are perilously close to finishing below their 50-day moving averages for the first time in months. Chart watchers follow moving averages to determine bullish and bearish momentum in an asset. For both benchmarks, falling below its short-term average may signal that the bulls, who had grown euphoric over Trump’s policies to push forward pro-growth policies, have lost a battle with bears, who see stock valuations getting too rich.

Check out: How you’ll know if the stock-market bulls remain in control—in one chart

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