One Time’s Stumble or the Long Awaited Stumble?
The stock market underwent a relatively quiet week. Until Friday that is – when tech stocks fell dizzyingly, biting 1.8% out of the NASDAQ’s value, alongside sharp losses on other market indexes which had hit historic highs just the day before! The tech sector (XLK), which soared this year and led the latest stock market rally, plunged 2.7%, the stock of Apple (AAPL) falling 3.9% in its sharpest day of losses since April 2016. Other top tech stocks, beloved by investors far and wide, had the floor taken out from under them.
In Summary for the Week: The Dow Jones ended up 0.3%, the S&P 500 shedding 0.3%, with the NASDAQ falling 1.5%.
Facebook (FB) tumbled 3.3% on its sharpest day of losses since November 2016 and Google (GOOGL) fell 3.4%. The chipmaker, Nvidia (NVDA), which received a particularly favorable recommendation from Citigroup analysts just this past Thursday, fell 6.5% after Citron Research, known for its highly precise short projections, communicated its projection that NVDA was heading back to $130, and did it ever! NVDA ended the week at $130!
Based on a Goldman Sachs report, FB, AAPL, AMZN, MSFT, and GOOGL have a market cap constituting 13% that of the S&P 500, though have contributed 40% of the index’s gains this year. Goldman Sachs analysts have cast doubt on tech stocks’ pricing, stating that volatility in the sector has become so low that it’s become less volatile than safe haven assets, like utility stocks.
Tech sector profit taking was expected, the sector’s stocks priced at their upper range, investors now shifting funds to sectors that have lagged behind over the last few months like banking and energy stocks. The movement on the NASDAQ changes the tone as far as low market volatility goes. When we see a surge of movement the like of Friday’s, the only thing that is certain is that volatility is high and can work in either direction. What remains to be seen is how deeply implanted the psychological change is among investors; it goes without saying that these thoughts are what weighed on investors over the weekend. Though it doesn’t change the long-term outlook, Wall Street’s love affair with tech stocks can’t go on forever – and that’s what the market is trying to tell us!
The real test will be after the market’s next jump. You can expect correction buyers to pop up quickly and capitalize on the most recent losses. The question, though, is whether after the market corrects upward, it will again fall, leading to a lower high, which from a technical vantage point would signal that the market is likely in for more losses and lower price levels.
Stock market volatility is likely to pick up this coming week, as traders await the pronouncement of the Federal Reserve – and also wait to see whether last week’s shakeup and tech sector selloff will continue into this week, and more importantly, whether the hemorrhaging will carry over to other sectors.
The Federal Reserve will be convening for a 2-day meeting on Tuesday, the central bank expected to announce a quarter point rate hike on Wednesday afternoon.
A downpour of economic figures is expected this week, the lion’s share of the market’s attention, though, to be placed on Consumer Inflation (CPI) and retail chain sales numbers, which will both come out just hours before the announcement of the central bank’s decision on Wednesday afternoon at 14:00 N.Y. time. Consumer-side Core Inflation Index is expected to record a 0.2% gain, meaning an annualized clip of 1.9%, slightly beneath the Fed’s 2% target.
Have a great trading week!
|Wednesday||10:30||Crude Oil Inventories||–||Low|
|Wednesday||14:00||FOMC Rate Decision||–||High|
|Thursday||8:30||Export\Import Prices ex-ag.||–||Medium|
|HRB||H&R Block, Inc.||PM||Tuesday|
|JBL||Jabil Circuit, Inc.||PM||Wednesday|
|KR||The Kroger Co.||AM||Thursday|
Today’s Picks – Day Trading!
New York Strategy Swing