The stock markets ended the week in the red.
First, the scoreboard:
- Dow: 15,425.5, -72.8, -0.4%
- S&P 500: 1,691.4, -6.0, -0.3%
- NASDAQ: 3,660.1, -9.0, -0.2%
And now, the top stories:
- It was a quiet end to a quiet week. There were no major market-moving economic reports or earnings announcements worth mentioning. But there was some interesting commentary from the analyst community.
- UBS’s Art Cashin reflected on a market phenomenon that occurred on Thursday, which has him a bit nervous. “So yesterday, as I watched the yields on bonds move lower despite a mediocre auction, I re-examined the pattern,” he said. “What could cause stocks and yields and the dollar to all weaken simultaneously? One possibility might be a real weakening of the economy. That certainly would weaken yields and the dollar as the Fed would abandon tapering.”
- JP Morgan’s Tom Lee shared an interesting anecdote that may give you reason to be bullsh.”[A]t a large group lunch earlier this week with 80 or so wealth advisors, we heard how most individual investors are spectators in the equity markets, having a greater share of their assets in bonds, particularly munis — apparently, stocks are for “other people” (who want to take the risk),” he said. “In our view, sentiment tends to have contrarian implications — that is, if investors are generally (anecdotally) cautious, this suggests that a lot of the negatives are already reflected in current prices. Consequently, as much as investors are concerned about a potential pullback (which we acknowledge is possible), the current caution suggests better implied risk/reward. ”
- In China, we got some signs that suggested the economy might not be doomed for a hardlanding. In particular, industrial production and fixed asset investment stats were stronger than expected. “By considering the rebounding official PMI and trade data as well as the subdued inflation readings in July, we expect today’s data will have quite a positive impact on commodities, commodity-related currencies and some Chinese stocks (especially cyclical names exposed to [fixed-asset investment]),” said Bank of America Merrill Lynch’s Ting Lu. “We believe many Street economists will likely revise up their 3Q GDP growth forecasts soon.”
- This is not to say China is in the clear. “[W]e still believe the growth outlook beyond Q3 is murky for two reasons,” warned Societe Generale’s Wei Yao. “First, property sales growth peaked in April and has since started to fall…Second, overall credit growth is declining, which should limit the increase in fixed asset investment.”
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