State of the Stock Market Analysis for the Week Ending June 18th, 2017 (The Market Reacts to Amazon’s New Purchase 6-18-17)
Whole Foods Market (WFM) is a healthy place to eat, and although kind of pricey for consumers of that delicious and great food, the company has recently caught the eye of Amazon’s (AMZN) Jeff Bezos. Jeff offered $13.7 billion for the chain of supermarkets on Friday, and the stock of WFM soared almost 30% while Amazon rose 2.4% on news of the deal. This struck fear into the hearts of traditional retail supermarket companies, and we saw a big selloff, as names like Kroger (KR) fell 9%, Costco (COST) dropped 7%, and Wal-Mart (WMT) slipped by 4.6%. This was a monumental deal because we all know how Amazon is so good at disrupting traditional markets.
With its every move, Amazon continues to have a massive effect on everything that it touches. It began nearly 20 years ago with books sold at a loss, and Bezos has moved ever further, year by year, disrupting industry after industry. Amazon Prime delivers everything you can dream of to your doorstep for free, and it is no wonder that retail stores and malls across the country are closing their doors. This is great for consumers, but it is putting a lot of people out of work. Amazon’s push into the retail grocery space is yet another aggressive move, and if any company can pull it off, Amazon is a good bet.
The stock market took the Amazon news lightly on Friday, and while the Dow Jones Industrial Average did hit yet another all-time high, the market closed out the week quiet and mixed. The recent sell-off in mega-techs cooled down a bit, although Apple (AAPL) did fall about 1.4% on Friday. The concern among strategists is that the selloff in big-cap tech might be a sign that a broader market correction could be in the making. When “leaders” roll over, it is historically not a good sign. At the same time, though, the tech “leaders” have been red-hot all year, and a modest correction might ultimately be healthy.
Economic news this past week was mixed, and on Friday we saw some negative news in terms of the University of Michigan Consumer Sentiment report. Sentiment for June fell to 94.5, which was down from the previous 97.1 and below the expected 97.3 number. This could be related to the Washington DC scandal, but it just shows that consumers are not feeling all that optimistic right now. We also saw housing starts for May fall to 1.09 million versus the previous 1.16 million and the expected 1.23 million rate. The housing number mirrors the home builders index that also showed a decline this week.
The positive for bulls, however, is that the major indices are still quietly hovering near all-time highs. You might notice that while the Dow touched an all-time high on Friday, it received little fanfare from the financial media, and absolutely no mention at all from the “mainstream” media. Market tops get attention from the mainstream media, and by having no coverage, it confirms that we are in no way in some sort of runaway bull market. That is a very encouraging sign for a bull market that continues to gradually edge higher and higher.
As for the DC scene, who knows? Former FBI Director Comey and the Russian scandal grows in complexity, and the Gorilla was amused at the term of how the various government big wigs were “lawyering up.” President Trump’s new personal attorney apparently charges $1,500 per hour, and there were reports Friday that even VP Pence had sought private counsel. There was even news that some of these lawyers were getting their own lawyers. What a mess that will likely drag out for a long, long time.
Maybe that is why the stock market is unfazed, and maybe that is why the stock market does well when Washington is in a quagmire. It used to be said that a divided government is great for stocks because it is unable to launch new programs, but in our current scenario, we have divided individual parties within a divided government. One would think this would be a negative for the stock market, but it clearly is not. That said, the Gorilla wishes each and all a Happy Father’s Day and a relaxing weekend. We will be back in action on Monday, so again, have a great weekend!
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