After the long holiday weekend, investors woke up on Tuesday to a nasty drop in the equity markets. And while stocks moved sideways for the next few days, Friday was greeted with another sell-off. In all, the Dow Industrials and the S&P 500 lost about one percent on the week, but the NASDAQ was a bit kinder with a decline of 0.38%. With the exception of a small advance in healthcare stocks on average, all other sectors were in the red, especially energy, industrials and basic material stocks. Transports, which I have been keeping my eye on, were negative by over 2% for the week. The slump was primarily blamed on continued jitters over Greece’s credit issues (nothing new), but its exit from the Euro Zone is once again in the headlines, and should it happen, may cause shock waves around the globe, despite Greece’s small impact on the worldwide economy. European markets, therefore, were sharply lower with Germany, Spain and France particularly hard hit. And most Asian markets were negative, especially in the more emerging countries. Chinese stocks were adversely affected by about two percent, as regulators again moved to tighten trading restrictions and margin requirements. A revised first quarter GDP growth rate to a negative 0.7% did not help the mood, either. Next week, traders will have to assess the impact of another jobs report, which could move the needle on Fed interest rate timing, now expected sometime in September. With this overhang in place, the market will not be able to find much positive direction until after Labor Day. Investors, however, appear to accept the current state of affairs and despite some choppiness along the way, the momentum remains with the bulls. As the key indexes have stayed near their respective all-time highs, caution is understandable in the near-term. Further out, however, earnings should improve along with a moderately improving economy and valuations, which are indeed frothy, will therefore normalize.
Here is the answer to last week’s trivia question: Foot Locker, Inc., the specialty athletic shoe and apparel retailer, was originally what company? Dayton-Hudson, Herman’s World of Sporting Goods, F.W. Woolworth Co., or Oshman’s Sporting Goods? Answer: F.W. Woolworth. Although established in 1974, and organized as a separate company in 1988, Foot Locker is a successor corporation to the iconic five-and-dime chain.
Today’s Trivia Question: Prices for micro-cap companies or penny stocks, which do not trade on any of the major exchanges can be found where? On “Pink Sheets”, online at cheapstocks.com, The Wall Street Journal Saturday Edition, Reuters “Low-Priced Stock Hub”?