After a quiet and flat start, the market gradually trended lower during the early trading before taking a plunge late in the afternoon. All three major indices posted a loss in excess of 1.5%. The Dow Transportation Average, which performed great until yesterday, did even worse and closed the day lower by more than 3%. It is worth noting that today’s sharp drop happened in a session with most economic news in-line or better than expectation. The productivity for Q1 rose 2.2% compared to 1.5% expected and the unit labor costs increased at a rate of 2.2%, below 2.6% consensus. The March pending home sales fell 1.0%, in-line with expectation. However, another record high oil price finally took a toll in the market.

All 10 major sectors ended the day lower. Financials and transportations were among the biggest losers. The former was performing poorly throughout the session with selling pressure picking up in the afternoon when news that the SEC will require investment banks to disclose their capital and liquidity levels hit the wire. The latter was a victim of the record high oil price, which climbed above $123 mark despite of rising US dollar and a bearish inventory report. Maybe the only thing that can stop oil price from moving higher is the oil bulls themselves when they decide enough is enough. The US dollar moved higher against most major currencies. Treasuries reversed their early losses and ended the day higher following a sharp drop in the equity market. The VIX index, which is usually used as a fear indicator, jumped 1.54 point today but remained at a rather low level. Volumes picked up noticeably during the afternoon selling, indicating we may need some really good news to reverse today’s sharp drop.