Sure, it’s only Tuesday, but it looks like the market’s ability to extend its streak of weekly wins has hit a bump.
Following the biggest drop in six weeks for U.S. stocks, some out there are scratching their heads, while others are a little alarmed.
“Today’s selloff does not make a lot of sense, because there wasn’t any big economic or corporate news. It is puzzling to see such a delayed reaction to a strong jobs report in an otherwise quiet week,” said Randy Frederick, managing director of trading & derivatives at Schwab Center for Financial Research, summing up yesterday’s action to MarketWatch.
True, markets will have a hard time sidestepping last Friday’s strong jobs data, which to some all but guarantee a Fed interest-rate hike just in time for the holidays. The fear is that anticipation of the hike could lead to a repeat of the volatility we saw this summer.
Nour Al-Hammoury, chief market strategist at ADS Securities, says drops of 1% for Europe and U.S. stocks yesterday look unsettlingly familiar.
“This follows the pattern of June and September — the previous months when the rate increase was expected to happen — and this nervousness over buying equities could start another market correction,” he says in a note to clients.
S&P 500 over 6 months
From there to our call of the day, which offers more caution. It’s a look over to the tech space, where bad breadth has been a bit of a problem. And then our chart, which offers some lukewarm comfort for the long-term investor. Oh and Moody’s was also full of cheer today, saying the world’s policymakers are fast running out of ways to fix problems. If they happen.
Buyers aren’t exactly stepping in this morning. Dow YMZ5, -0.92% and S&P ESZ5, -0.22% futures are moderately weaker, which is the same for Europe SXXP, +0.04% Asia was generally weaker, with sharp losses for Hong Kong HSI, -1.43% The dollar DXY, +0.42% is holding steady.
Gold GCZ5, -0.14% and crude CLZ5, +0.00% are both down a little. There’s a lot of noise around oil today. Specifically, the IEA has warned that Brent oil may not return to $80 a barrel until the year 2020.
Dana Lyons, partner at J. Lyons Fund Management, has been watching a rally thinning out for tech stocks. The Nasdaq-100 is up 6.53% since the lows of September, but the broader Nasdaq market reflects more daily decliners than advancers over the past month.
“That is quite an internal contrast in the market. And it is extremely unusual for an NDX that is very near its 52-week highs — at least over the past 15 years,” writes Lyons on his Tumblr blog.
On the one hand, this market has managed over recent months and years to push its way higher past “any and every piece of structural concern that has crossed its path,” he says. On the other, he’s seeing structural weakening and divergences for stocks that haven’t been seen since 2000 and 2007, when the market was unable to get past those internal problems.
“It is our contention that the market remains with the confines of its post-2000 secular bear market. Thus, we would favor the latter camp. That is, we do not believe the Nasdaq-100, or the other leaders in the market will be able to carry the ever-increasing burden indefinitely,” warns Lyons.
No imminent collapse now, but the more support that comes away, “the more vulnerable this house of cards will be,” he says. Read his full blog post here.
“I think if you’re looking at a PC, why would you buy a PC anymore? No, really, why would you buy one?” — Apple CEO Tim Cook, in the U.K. for the launch of the iPad Pro, talks to The Telegraph.
Cook also admits Apple’s iPad minis will get squeezed by its larger iPhones. “But I think it clearly created some cannibalization — which we knew would occur — but we don’t really spend any time worrying about that, because as long as we cannibalize [ourselves], it’s fine.”
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