Looking for a New Safe Haven!
Since closing above the 2,800 point level 2-weeks ago, if the S&P 500’s ability to maintain the 2,800 point level was questionable back then, that’s all the more the case now. After Facebook (FB) plummeted 20% this past week in just one trading day (the largest loss of market cap, ever, for an American publicly traded company in a single trading day) – the NASDAQ then taking a nice beating in Friday’s trading – the S&P 500 will face even greater difficulty now in not falling beneath 2,800 points.
The week ended with the S&P 500 still trading above the critical 2,800 point level – and this coming week that will precisely be the axis that investors focus on. The hope, though, is that the index will make its next big move, breaking up January’s all-time high.
Weekly Summary: The S&P 500 succeeded in rising 0.62%, the Dow Jones tacking on 1.53%. The NASDAQ, though, fell 0.77%.
For a whole week now, we’ve complained about the inconsistency in the market. Indexes have proven misleading from one day to the next; momentum in one trading session doesn’t continue into the next. And there’s no clear lead being taken by the large sectors! This erratic movement continued into Friday’s session as well, but this time around, it was a lot worse. The positive opening gap was the exclusive biproduct of Amazon’s results; very quickly, though, the gap was closed.
All throughout the past trading week, the market’s path was fraught with hurdles, one prime one being the reaction to the earnings reports of some tech sector giants. Facebook (FB), Twitter (TWTR) and Intel (INTC) all reported disappointing number, while Amazon (AMZN) barely succeeded in retaining the most minimal gains on Friday, after having reported strong numbers on Thursday after the closing bell. Its numbers weren’t bad, but the response to them was rather bad.
After having struggled against a lack of momentum for some time, market players decided to throw up their hands in surrender on Friday. Small-cap stocks (IWM) collapsed, suffering from their largest outbreak of selling since April.
There was no safe haven on Friday. The only stock grouping that showed some sort of strength was energy services, which had been one of the market’s weakest sub-sectors year-to-date. FAANG stocks no longer represent safer shores, and it could be the time to seek out another haven for your moneys.
The big question now is whether the bears can further Friday’s weakness going into this trading week. It’s been some time now since we’ve seen bonafide negative momentum in the market. Time in and time out, stocks have succeeded in shrugging off momentum of this ilk – and relatively quickly at that.
This coming week proceeds with the continued deluge of earnings reports, the main attraction undoubtedly being Apple (AAPL), which will be reporting on Tuesday after closing. Apple will command special attention given the extreme earnings report reactions bred by other FAANG players. Along with Apple, this week we’ll get the numbers of almost one-quarter of the companies on the S&P 500, in the last big trading week of the Q2 earnings season.
Until now, earnings have jumped 22.6% year-over-year, with the ratio of companies beating projections to those falling beneath them coming out at 4:1. Other companies expected to report this coming week include: TSLA, CAT, PG, and DE.
The acme of the Economic Calendar will be this Friday, with the release of July’s employment numbers. Economists are expecting 195 thousand new job hires; the consensus reading on unemployment is a 3.9% reading, down from last month’s 4% figure.
Have a great trading week!