Bulls headed into Friday’s session thinking that we might just close out the week with the Dow and the S&P 500 hitting all-time highs, but that was not to be the case. Global issues had suddenly poked their heads back into the ball game, and the stock market sold off sharply. On Friday, it was renewed concerns about a Greek default, as well possible rule changes for the Chinese stock market that pushed stocks deep into the red. At one point, the Dow was down by about 350 points, but stocks did manage to bounce back a bit from those lows, although we still closed out Friday with the Dow and Nasdaq down about 1.5% and the Nasdaq down 1% for the day.
It was a rough ending to what had been a relatively flat and quiet week, and it did not help matters to have Bloomberg down for more than two hours as it experienced technical problems. We had not seen much from the “global shock” arena in quite a while, so having Greece and China spook the stock market today caught many investors off guard. The Volatility Index (VIX) showed that fear levels spiked sharply, and it moved above 15 before settling back down to close out Friday just under 14. It was not that bad of a week, though, as the Dow and Nasdaq fell 1.3%, while the S&P 500 lost about 1% for the week.
From a technical standpoint, the S&P 500 did manage to hold its own this week, despite Friday’s big decline. The late-February all-time high was looking like a possibility for Friday, but the decline we saw actually pushed the S&P 500 back below its 50-day moving average of 2,077. The S&P 500 bounced at 2,072 to close out the day at 2,081, allowing it to claim credit for holding above that important technical level. Bulls were quite pleased that the broader market did not trail off and close out the session at its low of the day, so this is definitely a plus as we look toward Monday’s session.
Friday’s downturn ignored what was actually some very encouraging economic news. The University of Michigan consumer sentiment report for April came in at 95.9, which topped both expectations of 93.5, as well as March’s 93. Consumers have been on the fence over the past few months, so seeing an uptick in sentiment was one of those economic news bytes that normally would have fired up the bullish vibe on Wall Street. However, Greek and Chinese news trumped the consumer report. In other economic news, the Index of Leading Economic Indicators (LEI) rose 0.2%, and that was up from the previous month’s 0.1% rise, so it was another plus to see this forward looking index perk up a bit.
Earnings season continues to look strong, with the majority of companies meeting or topping what were lowered expectations. This season has been a plus since there was so much concern that a bad earnings season could send signals that first quarter GDP growth might be at or below the 1.5% that economists have predicted. There was even talk of Q1 GDP coming in below 1%, but with earnings season looking good and economic numbers looking up, the GDP worries may turn out to be unfounded when the GDP number is released on April 29th.
So on we head into the last half of April, and while earnings and economic news are still center stage, we might have some “global shocks” reappearing. News this week that the U.S. was sending 300 paratroopers to Western Ukraine to train national guardsman is not exactly going to have Vladimir Putin nodding in agreement. So, Greece, Russia, China and maybe even the Middle East could bring the assorted global themes back into play in the days and weeks ahead. The stock market continues to hold up well, though, and it seems as though this six-year old bull market might still have legs.
The Gorilla wishes each and all a relaxing spring weekend, and amazingly enough, summer is right around the corner. The New Year had promised to be a challenging one, and it is living up to that billing. We were so close to new highs for the majors going into Friday that it made Friday’s selloff all the more disappointing. Next week should be telling, though, so stay tuned as we will be back in action on Monday. Again, have a great weekend!
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