Amazon Stars in End-of-the-Week Drama!
Stocks ended the week mixed, with the S&P 500 recording negligible gains of 0.1%, the NASDAQ dropping 0.9% with pronounced tech sector weakness. The market’s focus at the beginning of the coming week will remain on tech stocks, which stabilized on Friday after having seesawed all week long, after being hit by massive selling at the beginning of the week. The tech sector (XLK) was the week’s worst-performing sector, shedding 1.1%.
Investors will also continue to respond to Amazon’s (AMZN) large and unforeseen move to acquire Whole Foods Market (WFM), making a $13.7 billion offer for the supermarket chain. The move shook up retail and food chains, erasing in the process, on aggregate, billions of dollars of their market caps. While Amazon offered to buy WFM at a valuation of $42 per share – a move that led to a 29% surge in the latter – competing store chains fell sharply on Friday. Target (TGT), for example, plummeted 5.14%, the largest U.S. supermarket chain, Wal-Mart (WMT) slashed 4.65%. The speculation on the market is that WFM might get a counter bid, a fact that caused the stock to end slightly above $42, Amazon’s offer price.
Friday’s movement could have been expected to be sluggish, in keeping with the slow summer months – if not for the drama piqued by Amazon. That notwithstanding, despite the jump in volumes in light of Friday’s “triple witching” option expirations, most of the market was rather quiet.
A whole slew of political news and economic events last week had laid the groundwork for substantial market movement, but when push came to shove, the only event that really had an impact on market movement was Fed Chairwoman, Janet Yellen’s announcement that the Fed was hiking rates, but more importantly, her comment that the central bank hopes to start normalizing its balance sheets later this year. The bears for quite some time already have been expecting the Fed to be the catalyst sparking a turnaround in the market; and the fact that the Fed had let its stimulus-driven balance sheet mushroom to $4.3 trillion, quantitative easing bond purchases and all, was to be, the main driver behind a deep correction, they were hoping. Until now, they’ve grossly erred, but the market’s response last week to the Fed announcement proves that their approach wasn’t baseless.
This coming week, Wednesday’s existing home sales figures will be key, as will be the case with Friday’s new home sales figures, along with Markit’s manufacturing figures. There will be half a dozen Fed bankers who will be speaking this coming week, which kicks off with the speech of the N.Y. Fed branch, William Dudley, on Monday. The speeches are likely to shape market movement in the event they give voice to concern about the latest weakness in the newly released economic figures – or hint at the bank slowing its rate hike pace, a fact that would suggest Fed concerns about the robustness of the economy.
Crude prices are likely to be consequential for stock movement, while traders are carefully looking to see whether crude will succeed in maintaining the support level of $45 a barrel, or on the flipside, whether it will fall deeper in the direction of the next support level at $40, perceived far and wide as a slippery slope for the market. The crude ended the week at the $44.74 level, with cumulative weekly losses of 2.4%.
In Summary for the Week: We now find ourselves in one of the least opportune seasons for the market, June itself being one of the worst-performing months historically. The Federal Reserve is now off the radar screen, and in the absence of any significant earnings reports in the near future, there really isn’t any news of substance that could serve as a driver behind market movement. Traders will need to continue to focus on movement in individual stocks, without resting their laurels on the market on large.
Have a great trading week!
|Tuesday||8:30||Current Account Balance||-$123.4B||Medium|
|Wednesday||10:00||Existing Home Sales||5.52M||Medium|
|Wednesday||10:30||Crude Oil Inventories||–||Low|
|Thursday||9:00||FHFA Housing Price Index||–||Medium|
|Friday||10:00||New Home Sales||599K||Medium|
|RHT||Red Hat, Inc.||PM||Tuesday|
|ADBE||Adobe Systems Incorporated||PM||Tuesday|
|CACI||CACI International Inc||PM||Wednesday|
|HAIN||The Hain Celestial Group, Inc.||AM||Thursday|
|CMC||Commercial Metals Company||PM||Thursday|
|BBBY||Bed Bath & Beyond Inc.||PM||Thursday|
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