STOCK MARKET COMMENTARY:
FRIDAY, SEPTEMBER 27, 2013
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MONDAY-WEDNESDAY’S ACTION: Stocks Pullback
Stocks fell on Monday as investors turned their attention to the debt ceiling debate in D.C. The Dow Jones Industrial Average officially added its three newest members:Goldman Sachs (GS), Visa (V), and Nike (NKE) which replaced Alcoa (AA), Hewlett-Packard (HPQ) and Bank of America (BAC). New York Fed President William Dudley defended the Fed’s decision to not taper QE at their September meeting. Shares of Apple (AAPL) jumped 5% after the company announced a record 9M iPhone 5 sales which easily topped estimates. Elsewhere, BlackBerry surged after Fairfax Financial announced a $4.7B bid to acquire the company for $9/share. Overseas data was positive. Eurozone business activity grew faster than expected in September, thanks in part to strength from France and Germany.In China, the HSBC flash manufacturing PMI of small and medium size businesses hit a six month high of 51.2 in September.
On Tuesday, stocks ended mixed causing the S&P 500 to have its second 4-day losing streak of 2013. Meanwhile,the small cap Russell 2000 index jumped a new record high which bodes well for the major averages. Economic data was mixed. The S&P Case/Shiller index showed that home prices rose 0.6% in July and were up 12.4% vs the same period in 2012. That matched estimates and was the strongest annual increase since February 2006. Meanwhile, the consumer confidence index slid in September to 79.7 which just missed the Street’s estimate for 79.9. The Richmond Fed manufacturing index was 0 and missed the Street’s forecast for 10. The FHFA House Price Index topped estimates and rose 1% from last month and 8.8% from the same period in 2012. The Street expected a gain of 0.6% and 7.8%, respectively.
Stocks experienced their first 5-day losing streak of 2013 on Wednesday after several low-end retailers said sales may be weaker than expected. Wal-Mart (WMT) said it is cutting orders amid rising inventories heading into the holiday shopping season. Other big-box retailers including Target (TGT), Costco (CSCO), Dollar General (DG) and Dollar Tree (DLTR) fell on the news. Separately, new home sales rose 7.9% in August to an annual rate of 421k units but held near their lowest levels for 2013. Weekly mortgage applications rose for a second week which bodes well for the housing market. Durable goods orders edged up 0.1% in August, topping estimates for a decline of -0.5%.
THURSDAY & FRIDAY’S ACTION: Stocks Pullback Into Their 50 DMA Line
Stocks edged higher, snapping the longest losing streak of the year after as investors digested the latest round of economic data. The government the US economy grew at a 2.5% annual rate in the second quarter which was a bit shy of the 2.7% estimate. Weekly jobless claims slid by 5k to 305k which was much lower than the 330k forecast. Pending home sales slid -1.6% in August to 107.7 which was the lowest level since April. Stocks fell on Friday as debt limit concerns remained unresolved. Consumer sentiment slid to 77.5 in September which missed estimates for 78 and was the lowest level in five months.
MARKET OUTLOOK: 50 DMA Line Is Support
The market is pulling back and it will be important to see if the bulls can defend the 50 DMA line. So far this year, every major potential crisis (headline risk) has passed without an issue. We will see what happens in D.C. and then look forward to earnings season. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.