State of the Stock Market Analysis for the Week Ending September 20th, 2014 (The Current Stock Market is Flat and Mixed 9-20-14)
Flat and mixed has been the theme for September, and that was exactly how the stock market closed out the week. The Dow and the S&P 500 did touch new highs, and the Nasdaq did hit a new 14-year high early in the session Friday, but the bulls were not running in any big way to close out the week. Despite all of the enthusiasm and action surrounding the Alibaba (BABA) IPO, the broader stock market gave a collective shrug and headed into the late-September weekend flat. The S&P 500 did gain 1.3% for the week, though, and the bulls have no complaints with that kind of lift.
Having a stock market acting tame in the face of one of the biggest IPOs of all-time might actually be a bullish sign. A runaway stock market fueled by red-hot IPOs often ends badly (think year 2000), so that was why seeing a lackluster market with the backdrop of renewed IPO madness might actually be a plus. Most American investors, and most Americans in general, had never even heard of Alibaba before Friday, which is proof that we are a long way away from the mentalities and market madness that prevailed in the dot.com Bubble of 1999-2000.
This is not to say “the coast is clear,” but it really is strange to see the broader stock market at all-time highs with so little “audience participation” and fanfare. The “buzz” that accompanies market extremes and market tops is simply not there right now. Not many investors are “chasing” stocks, and fewer are even getting involved with the renewed optimism we are are seeing on Wall Street. We are seeing a fair amount of skepticism, and since skepticism is ultimately bullish for stocks, many bulls are thinking that this market might have more upside before it is done.
Investors began the week with high hopes and big concerns. Bulls wanted to see a docile Fed, and that was exactly the message we received. The dovish posturing that we heard Wednesday from the Fed sent the message that it was in no rush to raise interest rates, which was enough to put the bullish camp at ease. The Fed said that it would focus on employment levels and inflationary pressures rather than any “target” calendar date for rate hikes, which also helped keep the stock market buoyant.
Janet Yellen got an overall “thumbs up” rating from the stock and bond markets in that they each seem comfortable with Ms. Yellen and the Fed. That is a huge plus as Yellen heads toward the end of her first year as Fed Chairman. Markets often test new Fed Heads early on, but so far, there have been no big calamities or meltdowns under Yellen, and that has bulls breathing a sigh of relief. The year is not over, though, and we all know that anything can happen. However, so far it has been a good year for Janet Yellen and the Federal Reserve.
As for Alibaba and its IPO, it was a fairly solid day it you were lucky enough to snag some IPO shares at the $68 offering price. The stock was up big from that level and finished the day just below $94. It also put its Chairman, Jack Ma, on the map as the richest man in China. It was one of those IPO offerings that harkened back to the Bubble Days of 1999-2000, but oddly enough, Alibaba seems to have a whole lot more going for it than Pets.com did 14 years ago. BABA is big, profitable and focused, and it is definitely a company that will be in the news for the foreseeable future.
Alibaba has been compared to Amazon, Google, eBay, Yahoo, PayPal, and even Apple’s iCloud programs. BABA closed out Friday with a market cap in excess of $200 billion. That is not too bad for a new IPO that is backed by a hard-charging global brand ready for action. It will be interesting to see how the stock continues to trade and how the company performs in the weeks and months ahead, so stay tuned, as we see if a “Star was Born” on Wall Street on Friday. Congratulations to the team at Alibaba.
We have just a week and a half left in September trading, and most bulls are amazed at how calm and cool this September has been. This is usually a “rough and tumble” time of year, and so far, that tough downside action has not appeared at all. October is right around the corner, and we all know that Octobers can be quite eventful, but then again, maybe we will continue to see more calm waters just as we have in September. Earnings season gets into full swing in early October, and it will be important to have solid enough earnings to support the extended prices we are seeing in the stock market.
That said, the Gorilla wishes each and all a fun-filled weekend of friends, family, football and food. In addition to the weather, this is especially a great time of year because we are not going through any sort of economic or market meltdown as we were back in the Fall of 2008. The stock and bond markets are calm, and we hope you and your family are as well. Again, have a great weekend and we will be back in action on Monday!
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