Four placid days led to a Friday that in recent terms would be considered “wild” but in 2008 terms would be considered a “quiet session”. There was some actual volatility Friday as indexes gapped up and ran before reversing sharply mid morning and sell off, led by the giant tech stocks that have been the stars of 2017. If that is a precursor of anything or algorithms gone wild for a few hours, we shall see in the next few weeks. Thursday’s Comey testimony and UK elections didn’t really move the needle much but the latter perhaps led to some of the volatility Friday.
Also Thursday, the ECB, as expected, left interest rates unchanged but said it continued to expect interest rates “to remain at present levels for an extended period of time, and well past the horizon” of its asset-buying program, which is set to run at least through December. In previous statements, the ECB had said it expected rates “to remain at present or lower levels for an extended period of time.” So this is what markets have become the last decade – word smithing central banks massive buying programs for any potential tiny change.
In a quiet economic week, on Monday ISM non manufacturing fell 0.6 to 56.9 in May. Any reading above 50 indicates improving conditions, however.
Of note – Alphabet (GOOG), Google’s parent, closed above $1000 for the first time this week… a week after Amazon did. Speaking of, Amazon is cutting prices of its Prime membership for low income workers as a direct swipe at Walmart.
The online retailer giant said Tuesday that it will offer a nearly 20% segment of the U.S. population—people who obtain government assistance with cards typically used for food stamps—a $5.99 monthly Prime membership, less than the $10.99 a month or $99 annual plan for other consumers. The membership buys access to unlimited two-day shipping, video and music content, photo storage and other perks.
These 2 stocks, along with Apple did sink Friday but goodness sake they have been on an epic collective run considering the massive size they are.
The tech sector’s tumble also follows a warning from Goldman Sachs that highfliers such as Facebook, Amazon, Apple, Microsoft and Alphabet—which had significantly contributed to the market’s multimonth rally—may be overextended. “This outperformance, driven by secular growth and the death of the reflation narrative, has created positioning extremes, factor crowding and difficult-to-decipher risk narratives,” said Robert Boroujerdi, an analyst at Goldman Sachs, in a note.
Here is the 5 day weekly “intraday” chart of the S&P 500 per Jill Mislinski.
Americans didn’t really want to go to Cuba in great numbers after all…
Fascinating profile/story of Citron Research’s head man.
The week ahead…
The June Fed meeting and a “baked in” rate hike will hit mid week. Yellen’s words at the press conference may be of interest.
Traders see a 95.8% probability of a U.S. interest rate increase at the conclusion of the Federal Reserve’s two-day policy meeting next week on June 14, CME Group’s FedWatch showed.
The only major economic report is retail sales on Wednesday with expectations of 0.0% growth (0.2% ex auto)
Short term: Friday’s reversal put both indexes back in range of the 20 day moving average. In the old days that sort of day may have been more interesting but nowadays it just like a pit stop on the way to bullying more bears.
Amazing! Friday the Russell 2000 FINALLY seemed set to exit this range in yellow but the selloff pulled it back. Now it’s right at the top of said range that it has been in all of 2017.
The NYSE McClellan Oscillator is in week 2 of the black, so a feather in the cap of bulls.
Long term: Here are 5 year charts on the major indexes; we are a broken record here but it would take a very severe selloff to change prospects here.
Charts of interest / Big Movers:
Cogint (COGT) shares tumbled nearly 22% Monday after a short seller’s note alleging the data-analysis company’s insiders were under investigation.
This past week was a week. Therefore, retailers had to get hit. This week we had crafts retailer Michaels (MIK) and Macy’s (M) on Tuesday. Macy’s said its gross margins will be weaker than projected. Next week will be another week – you can guess how the story ends.
There was a flip of the scrip for a retailer Thursday as Nordstrom (JWN) soared 10.3% following reports that the retailer is exploring taking itself private. But it’s those sort of extreme measures that seem to be create the rare bright spots in the sector nowadays.
Also Thursday, Yahoo (YHOO) rallied 10.2% after news late Wednesday that up to 1,000 layoffs are expected.
Alibaba (BABA) jumped 13% after the Chinese e-commerce giant said revenues are expected to grow between 45% and 49% in 2018.
Friday, Endo Int’l (ENDP) slumped nearly 17% after the Food and Drug Administration late Thursday said it asked the company to stop selling its opioid pain medication, reformulated Opana ER, citing concerns about abuse.
Have a great week and we’ll see you back here Sunday!