State of the Stock Market Analysis for the Week Ending June 28th, 2015 (Mixed Batch for Major Indices 06-28-2015)
There was good news and bad news throughout the day on Friday, and when the dust finally settled, we had a mixed batch for the major indices. The S&P 500 was essentially flat, the Dow was up, and the Nasdaq was lower, which reflected a stock market that is still just not all that sure about which direction to move. The S&P 500 is up about 2% for the year, and that small gain reflects the uncertainty we are currently seeing in the stock market. Bulls were disappointed to see the Dow finish the week below 18,000, but they were pleased to see the S&P 500 hold the 2,100 level.
The big worry that hung over the market this past week like a storm cloud was Greece. This small bastion of the European Union (EU) has been in the news with crisis after crisis for years now, and the general consensus was that a “deal” would have been done by now. The idea of ECB and EU bureaucrats toasting champagne of yet another “resolution” was what global financial markets were thinking would be a great way to close the week, but the Greeks are not buckling. The lack of a “fix” has financial markets a bit nervous as we head toward Greek’s deadline debt due date next week.
Greek Prime Minister Alexis Tsipras is clearly playing hardball, and it seems that he and his leftist party that run Greece right now are not backing down. Greeks elected this rag-tag bunch because the Greeks were tired of the austerity programs that were undermining pensioners, destroying businesses, and creating heightened unemployment, particularly among younger Greeks. The EU and the ECB are tough foes in a battle about money and debt, so in some ways, Greece is playing its underdog status quite well. Greece has until next week to fix its debt problem, so we shall see what happens.
As for the U.S., we did see an impressive rise in the University of Michigan Consumer Sentiment report for June. Sentiment rose to 96.1, which topped both May’s 94.6, as well as the same 94.6 that economists had expected. This put sentiment levels at a five-month high, and it serves as a sign that maybe, just maybe, the broader economy is still lighting up the charts. The recent negative 0.2% GDP number was worrisome, but at least it was an upgrade from the previous negative 0.7%. Bulls are still worried about the strength of the economy just the same.
Friday may have been mixed and essentially flat, but is was a decent-enough performance to keep weekly losses minimal for the major indices. For the week, the Dow was down 0.4%, the Nasdaq was off 0.7%, and the S&P 500 was 0.4% lower. The S&P 500 is right on top of its 50-day moving average at the 2,102 level, so next week should be telling as to which way the broader market wants to move. We have seen zigging and zagging all year along that 50-day moving average, and most bulls are looking for a bounce and breakout to the upside from that important technical level.
Waiting in the wings, however, like a hawk looking for mice on the ground, is the Federal Reserve. It has telegraphed very consistently and clearly that interest rate hikes are on the way. Seeing Friday’s strong Consumer Confidence number rise so well, had many Fed watchers saying that a September rate hike might be inevitable at this juncture. The economic numbers have been strong lately, and we all know that the Fed is looking for and wanting “data” to begin moving short rates back up to “normal” levels. The main problem is that after a six-plus year bull run, the stock market might not react well to a fresh, Fed rate hike.
But we are now in the bloom of summer, and it is supposed to set in motion a couple of calm months of lazy summer trading, as most players are on vacation. This year could be different, though, especially with Greece teetering on the brink of collapse, and with the Fed leaning ever closer toward raising interest rates. Both of these events have the ability to “make or break” the stock market, so bulls will be hoping for a Greek “fix” and rates not being hiked anytime soon. That said, the Gorilla wishes each and all a wonderful summer weekend. We will be back in action on Monday, so stay tuned for what could be a very interesting and challenging summer.
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