November 10th, 2011

The rally that drove the Standard & Poor’s 500 Index up 20 percent since October fizzled after it failed to remain above its 200-day average for a second time.

The benchmark gauge for U.S. equities fell 3.7 percent to 1,229.10 yesterday, dropping below its average in the past 200 days, as surging Italian bond yields spurred concern Europe’s crisis is intensifying. One out of 500 stocks in the index rose, the fewest since June 2010. The measure closed above the 200-day level on two straight days at the end of October, following the biggest monthly rally since 1991, and again on Nov. 8.

Equities surged worldwide starting in the first week of October on optimism European leaders would solve the crisis, driving the S&P 500 out of a price range where it had been stuck since the start of August. Price indicators such as the stock index’s average price are captivating investors, said Brian Barish of Cambiar Investors LLC.

“The S&P 500 failed to break the 200-day and Italy’s debt yields really blew out, so you have a panicky reaction in the marketplace,” Barish, who helps oversee about $8 billion as Denver-based president of Cambiar, said in a telephone interview yesterday. In early October, “the market was poised to rally on almost anything, and it did,” he said. The 200-day average is “where it ran out of gas.”

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