U.S. stocks closed lower Wednesday but well above session lows as the S&P 500 held a technical level and biotechs recovered in late trade. ( Tweet This )
Traders noted that once the S&P 500 tested the 1,800 level in early afternoon trade, buyers started to come in.
"Any rally that starts is going to be violent to the upside," said Art Hogan, chief market strategist at Wunderlich Securities.
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Small-cap stocks and biotechs led the initial recovery. The major averages more than halved intraday losses, with the Nasdaq composite attempting gains as the close approached, but the late-day rally lost steam. The S&P 500 ended at its lowest level since April 2014.
"People who caught a free ride on the way up are getting out of it," said Jeremy Klein, chief market strategist at FBN Securities.
The major U.S. averages are down more than 9 percent for the year so far and are more than 10 percent below their 52-week intraday highs, in correction territory.
The S&P 500 closed 1.17 percent lower, near 1,859, after earlier falling more than 3.5 percent through its October 2014 intraday low of 1,820 to hit its lowest since February 2014. Energy closed down nearly 3 percent after briefly dipping 6 percent.
The Russell 2000 closed about half a percent higher after falling 3.66 percent intraday. The Dow transports briefly turned higher before closing down about half a percent, still well off an earlier decline of more than 3.5 percent.
"The market's been hurt in the past two-and-a-half weeks by strong openings. That invites selling," said Bruce Bittles, chief investment strategist at RW Baird. "Today the market opened sharply down and that shows a lot of pessimism here and may help turn things around."
The Nasdaq composite closed mildly lower at its lowest since October 2014 after attempting to recover from an intraday decline of more than 3.5 percent. The iShares Nasdaq Biotechnology ETF (IBB) reversed a decline of more than 3 percent to end up 2.75 percent, but well off session highs of 4 percent gains.
"My guess is what you're seeing right now is some short covering," said Paul Yook, portfolio manager at BioShares Funds, adding "the outlook for the sector is actually really good."
"Obviously you're going to have to bounce at some point. The biggest thing I've seen is the reversal in the biotech stocks," said Peter Coleman, head trader at Convergex.
"Once you start to get a lift off the lows you're always going to get short covering," he said, noting he remains a "little skeptical" the intraday recovery can hold.
About 11 stocks declined for every four advancers on the New York Stock Exchange, with an exchange volume of nearly 1.5 billion and a composite volume of nearly 6.4 billion in afternoon trade. Earlier, about 30 stocks declined for every advancer.
The number of new 52-week lows on the New York Stock Exchange (1,357) and Nasdaq (853) were the most on a single day since November 2008.