State of the Stock Market Analysis for the Week Ending FebruaryĀ 7th, 2016 (Fed Gets Green Light on Possible Rate Hike Week 2-07-16) All You Need Is Jobs

Friday’s stock market slide was disappointing for the bullish camp to say the least. The government’s jobs number for January fell short of the expected 180,000, but at 151,000, it still showed that companies were hiring and creating new jobs. The unemployment rate fell to 4.9%, and while that was lower than the expected 5.0%, it still did little to raise investor spirits. It showed that the economy is still “alive and kicking,” but the numbers also were strong enough to give the Federal Reserve a green light on a possible rate hike when it meets in mid-March. Bulls were hoping for a strong close on Friday, but that was not to be the case. For the week, the major indices were lower, with the Dow slipping 1.6%, the S&P 500 losing 3.1% and the Nasdaq falling 5.4%.

A bad jobs report would have made a Fed rate hike in March unimaginable, but what we saw on Friday was just strong enough to keep an interest rate hike a possibility. The Fed has backed off from its recent hints at rate hikes, so we will wait and see as to what we hear from the Fed Heads. Given the global weakness we have seen of late, especially in China, the Fed might really re-think a March rate hike. What has been surprising despite the worries about a global GDP slowdown, is the weakness in our own tech-heavy Nasdaq, which was under a lot of selling pressure all week.

One big Nasdaq downer that we saw on Friday was the social-business networking site LinkedIn (LNKD), which fell by 44% on Friday alone! Earnings were decent, but it announced a reduced outlook for the future, and the selling ensued. The stock had closed Thursday at $192.28, and then opened on Friday at $125.34, only to close out the week at $108.38. LinkedIn has been a great growth story, and its stock had done very well in the past few years. It had traded above $250 as recently as November, so the decline is worth noting. It shows that many of the “go-go” growth winners of the past few years are under a lot of pressure, and when the “leaders” start to stumble in a big way, it is not a positive sign for the broader stock market.

The Nasdaq touched its lowest level of the new year, and as expected, Apple (AAPL) was leading the drive lower. Apple peaked last year at $134.54 and closed Friday down 2.6% at $94.02. Apple was a “lead dog” in the bull market that followed that March 2009 bottom in the stock market, so seeing it still under so much pressure and down toward its 52-week low of $92 is worth noting. The so-called “FANG” stocks also saw sizable declines on Friday, as the group saw declines of 5.8% for Facebook (FB), 6.3% for Amazon (AMZN), 7.7% for Netflix (NFLX), and 3.6% for Google (GOOGL) – or as they now call it, “Alphabet.” These “Generals” of the Nasdaq are under a lot of pressure, which is a worrisome development for tech.

Back in the 1999-2000 Bubble Days, there were Nasdaq growth leaders like Microsoft (MSFT), Intel (INTC), Cisco (CSCO) and Qualcomm (QCOM) that had posted incredible stock market returns in the late-1990s. But when the bear market of 2000-2002 occurred, these were all still great companies, but they were hit very hard and never saw their all-time stock market highs again to this day. They are still rock-solid companies today (and they even have dividends!), but in terms of stock prices, they had peaked during that amazing tech bull market.

That is not to say that the “FANG” stocks and Apple (AAPL) have peaked, but it is something to keep in mind as we see a Nasdaq that is clearly under a lot of pressure so far this year.
Politics could also be playing a big role in this week’s decline. Elections are looming in November, and there is no clear indication of who will be each party’s nominee, nor is there any vibe on which party might win. Divisions in both parties over issues about nearly everything have the presidential election “up for grabs.” Bernie Sanders attacks on Wall Street and big banks were very interesting on Thursday night in his debate with Hillary Clinton. The mere mention of breaking up the big banks creates uncertainty, and we all know that uncertainty is not what the stock market generally likes.

The New Hampshire primary is Tuesday, so that should clear up some of the mystery about where this election might be headed. Maybe it will allow investor sentiment to turn back from its current downturn to a more positive place. This presidential election process has been very interesting, and it has had its share of “wild cards.” It seems down to Sanders, Clinton, Trump, Cruz and Rubio, so we will just have to wait and see what happens. One CNBC commentator even said that this election might even be about the future of capitalism. Now that is heavy stuff to hear on Super Bowl weekend.

Speaking of Super Bowl 50 – (by the way, they are playing down the Roman numeral “L”) – it should be a great game. Twenty-six-year-old Cam Newton versus thirty-nine-year-old Peyton Manning will make for a big event. There used to be an understandable and sometimes predictable Super Bowl AFC/NFC play on where the stock market might be heading depending on which team wins, but with all of the buyouts and team transfers, it does not make as much sense these days. It will be a fun day nonetheless, and the commercials and crazy half-time (rock band Coldplay!) only add to the spectacle.

It has been a challenging year for the stock market thus far, and we are testing some recent-year lows from a technical standpoint. Bulls are thinking a bounce could be waiting in the wings, so keep your fingers crossed. That said, the Gorilla wishes each and all a relaxing Super Bowl weekend. We will be back in action on Monday, so again, have a great winter weekend!

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