Here’s the news of the week – and how we see it here at McAlvany Wealth Management:
Stocks Meander on Mixed News
Early in the week US stocks tried to build on the momentum from last Friday’s xxx rally. Thanks to a few merger announcements in both China and the US, the effort proved to be somewhat successful – the Dow touched upon a new all-time high. By midweek traders adopted a different tone and began selling into rallies produced by dovish FOMC minutes and a headline that stated Walmart had handily beat its earnings estimates (though its actual growth was flat). By the close Friday, stocks had gone nowhere – again. As to the reason why, I am not entirely sure, it could have been some hawkish remarks from Fed officials Dudley and Williams or it could have been that European bank share prices were under pressure again (as negative interest rates continue to erode profits). Given the extremely overbought condition of US stocks, I believe traders may be taking profits ahead of what is likely to be a disappointing third quarter. In any case, the trading action is certainly uncharacteristic for a “no news” period, and it could indicate that stocks are ready to exhaust themselves and head lower. Even so, it could be a month or more before we see if that prognosis turns out to be true.
Away from stocks, fixed income was lower in response to Dudley’s and Williams’ remarks, but those remarks oddly didn’t keep the dollar from taking a bit of a nose dive, falling 1.27%. Gold was a little heavy on Friday (thanks to Williams), but managed to hold onto its gain of 0.40%. Both silver and the miners mimicked the softness in stocks, losing 2.05% and 3.5% respectively. Aside from this, oil saw its third week of gains, tacking on about 9.05% due (yet again) to more promises from OPEC to cut supply at their next meeting in September. Aside from this, there just isn’t much else to say about the markets. They have been quiet, but that’s exactly how they get sometimes before big moves in one direction or the other.
VP Investment Management