State of the Stock Market Analysis for the Week Ending June 11th, 2017 (Strange End to a Calm Week 6-11-17)
It was a strange week to say the least, and to make it all the more strange, was the “mega-tech” selloff midday Friday that drove the Nasdaq down 1.8%. All three of the major indices had hit new all-time highs, and it seemed as if we would head into the weekend fat and happy. Goldman Sachs then mentioned that the big-cap tech world, which we all love, might be “extended.” The selling ensued in a big way. For the day, Apple (AAPL) fell 3.9%, Amazon (AMZN) dropped 3.2%, Microsoft (MSFT) dipped 2.3%, and Alphabet/Google (GOOGL) slid 3.4%. This was a strange way to end a fairly calm week.
Some strategists noted that the Volatility Index (VIX) had dropped on Friday to 9.37, its lowest level since December of 1993, and maybe that much complacency set in motion algorithms that said sell. Who knows? The VIX spiked above 12 and finished the day at 10.70, but someone or something caused the big-cap techs to sell off wildly. The Nasdaq finished the week down 1.6%, and the Dow closed the week down by 0.3%, but the fast selloff on Friday was definitely a head scratcher. We had made it through “Super Thursday,” so why the selloff?
The Comey investigation and hearing on Capitol Hill was over, and we also saw a tough loss for Theresa May and her Conservative Party in England, but why would that make anyone want to sell Apple in a big way on Friday? The buzz is that these big-techs had huge gains this year, and all that was needed was a flashpoint or a catalyst to book some profits. It was just interesting that we saw all of those big names sell off in unison on a Friday in early June. We will see if those names bounce back on Monday.
We have Janet Yellen and the Federal Reserve on the docket for this upcoming Wednesday, and more than 90% of economists and strategists say that a rate hike is in the cards. While the stock market should take a rate hike in stride, the longer-term concern is about how many more rate hikes investors and the stock market will be able to “take in stride.” There comes the point when higher short-term rates start to look attractive compared to the “all-time high” stock market, so we will wait and see what the Fed has to say next week.
The Washington political drama regarding Trump and Comey was interesting to watch. It really had little effect on the broader financial markets, though, which was a plus. There were some taverns in DC that said they would offer free rounds of drinks for each time President Trump tweeted during the Comey hearing, but Trump’s team kept him from tweeting, at least until today. This political issue will likely drag on, and like most of these events, it will eventually go away. The stock market did hit new highs on Friday, and, again, that was a very good sign.
Next week is a big week for economic news, which should shed some light on the prospects for the economy. Look for retail sales for May early in the week, the Homebuilders Index, housing starts and Friday’s University of Michigan Consumer Sentiment report. The Fed’s FOMC comments and a press conference from Janet Yellen happen on Wednesday, so we will see if this high-level stock market can continue to build on the impressive gains we have witnessed so far this year.
The Gorilla wishes each and all a wonderful weekend. Summer is right around the corner, and while we all know summers have often been calm and quiet on Wall Street, with the speed of the news cycle these days, we will remain ready for anything. Again, have a great weekend, and we will be back in action on Monday. The NBA finals have been fun, so we will see if Golden State can complete an impressive sweep over the Cavaliers. The great LeBron James commented after the last game that he “had never faced such shooting firepower” from a team. But then again, you can never count LeBron out. A happy weekend to all!
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