US Stock Market Trending Down
Canadian Stk Mkt Trending Up
US Bond Market Trending Up (Yields Trending Down)
The markets ended the week with a selloff on Friday. Momentum and Biotech stocks were particularly hard hit and the selloff came on high volume. Is this the start of a much larger correction than we’ve seen in several months? There’s no way to know yet, but we all realize that we are in highly manipulated markets and that we are experiencing ‘bubble-type highs’. For instance, 74% of companies that came public in the last 6 months don’t have any profits! That number is only eclipsed by the level set in the Tech Bubble of 1999 where 80% of IPOs weren’t profitable. Make no mistake, there is risk in these markets and, as we saw on Friday when the NASDAQ dropped 2.6% in a single day, RISK HAPPENS FAST which is why I recognize the importance of closely watching what happens throughout the day.
Generally, my clients are not currently fully invested. There are some strategies that are currently invested in stocks but not at ‘full strength’. Other strategies have been in cash for several weeks now. That doesn’t mean my clients have been immune to the markets fluctuation but it does mean the volatility/risk has been much less. I’ll continue to monitor the markets and the accounts closely and take action as needed.
Have a wonderful and blessed day!
Here is the weekly market wrap (consensus opinion) from TRoweprice.com:
Week Ended April 4, 2014
Stocks reach new highs before sharp pullback on Friday
Stocks recorded modest gains, bringing some of the major indexes to new highs during the week before pulling back on Friday. Gains were strongest among mid-cap shares, while the technology-heavy Nasdaq Composite Index recorded a loss due to a late sell-off among highly valued biotechnology shares and other “momentum” stocks.
Investors await further signs of spring thaw
With first-quarter earnings reporting season set to begin next week, investors focused on economic data. Most were looking for signs that the economy had regained some traction after slowing due to harsh winter weather early in the year. Data late in March had raised hopes that a “spring thaw” might be in the works and was one factor in helping stocks recover from losses early in the month.
Labor market data are encouraging
The week’s important labor market data largely validated such hopes. Stocks gained Wednesday following a solid report on payroll gains from payroll processing firm ADP, and investors were also encouraged by a Commerce Department report of increased durable goods orders in February. T. Rowe Price Chief Economist Alan Levenson notes that, along with the weather, the winter slowdown was also due to a slower pace of inventory accumulation that is likely to reverse in the spring.
Friday brought additional good news on the labor front, although the market’s reaction was less enthusiastic. The Labor Department reported a healthy increase in March payrolls, along with better gains than originally estimated in January and February. Levenson notes that a rise in weekly earnings evident in the data should help support a retail sales rebound in the coming weeks.
More volatility in biotech likely, but long-term drivers remain in place
After an initial gain on the payroll data, however, markets turned sharply lower to end the week as investors resumed selling momentum stocks. These fast-growing and highly valued companies have led market returns over the past year but have exhibited periodic weakness in recent weeks. The Nasdaq Biotechnology Index has declined by roughly 17% since late February, and T. Rowe Price health care analysts would not be surprised to see more volatility in the group in the weeks ahead. Nevertheless, they continue to believe that the biotech industry will be a major driver of long-term value creation within health care as the pace of technological discovery accelerates based on our expanded knowledge of biological mechanisms.
Income gains may bolster corporate revenues
Slow employment and wage gains have been one factor restraining corporate revenue growth since the last recession. Earnings have fared far better, thanks in large part to cost-cutting measures and technology upgrades that increased profit margins. Still, many T. Rowe Price managers believe that companies will become more reliant on increasing revenues in order to grow profits as they exhaust cost-saving options and the labor market tightens. Thus, stronger consumer spending, along with improving business investment, may be arriving at an opportune time to support further—if more moderate—stock market gains.
|Index2||Friday’s Close||Week’s Change||% Change
|S&P MidCap 400||1367.89||10.60||1.89%|
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.
1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.
2The Dow Jones Industrial Average and the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock market and the National Market System.
Always At Your Service,
Jeffrey D. Voudrie, CFP® Practitioner