State of the Stock Market Analysis for the Week Ending June 29, 2014 (Late-Session Surge Goes Into the Green 6-29-14)
Late-Session Surge Goes Into the Green

It was one of those Fridays that had the “manipulation crowd” smiling. It is, after all, the end of the quarter on Monday so why not “run them hard” into the close? The late-session surge took all three of the major indices into green territory, and helped end the week on a positive note. It also helped erase some of the week’s weakness, and when the dust had settled, the major indices had posted a mixed bag of performances. The Dow was down 0.6% for the week, the Nasdaq was up 0.7%, while the S&P 500 was down by a hair, with a 0.1% decline.

It was sort of “par for the course” for the stock market this week, as there was an even amount of both positives and negatives. Seeing the University of Michigan confidence number top estimates was great, but seeing the growing infighting in Washington DC of nearly everything was a summer bummer. We have an important election coming in November, and it looks like more of the same. We are even seeing internal divisions and breakdowns in the two main political parties.

The stock market is holding its own, however, at or near all-time highs, and it seems a bit aloof and untied to the fate of our political process. The divisions are painful to watch day after day, but there really seems like no sort of “compromises” are anywhere on the table before November. Third-year terms are usually tough for the sitting President’s party, so we will just have to see how this mean-spirited political season unfolds.

Just when it seems like the end of the world, though, and the stock market should be tanking, we get the buzz and vibe of IPOs like GoPro (GRPO) and Alibaba (BABA) (and a host of others) to keep the stock market interesting. GoPro has spiked and Alibaba, a Chinese-based Internet company, is expected to have a market cap of around $160 billion when it begins trading on the NYSE. This sort of market “hotness” certainly makes that small rise in consumer confidence sort of boring in comparison, but a hot IPO market is always going to fire up the broader stock market. Even the company names have a huge “cool factor” to them.

So, where does all of this “good news” and IPO bullishness eventually take us? Market sages that have been around the block a few times say it will lead to excesses that are eventually reigned in quickly and furiously. Other sages who are more “optimistic” say that speculation is in check, stock market valuations (especially for the Nasdaq) are nowhere near what they were in 2000 or 2007, and that the economy is growing and essentially sound.

A good “bull-and-bear” tug of war is always healthy for a rising stock market, so the bullish camp is saying we should enjoy the upward ride. It has been horribly painful for the bearish camp for more than five years, so again, it is interesting to see this very public standoff between the two. The Fed is on board with “whatever it takes” to keep this party going strong, so maybe it is smartest to just enjoy the ride.

Summer slowness gets so much attention these days that maybe we might get the opposite this year. Who knows, but there are a lot of geopolitical events (and even events in the U.S. like the border crisis) that could get buyers to back off in a big way. Inflation remains a worry, which seems to get a lot of attention and then gets completely forgotten. It was a decent week for the stock market, though, and summer is finally here. Enjoy the weekend and plan on us being back in action for the holiday-shortened week on Monday!

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