The S&P 500 was lower by 0.59% and the Dow was off 0.47%. The bond market continued to sell-off in response to increased fears regarding Fed tapering. The added uncertainty regarding a successor to current Fed Chairman Bernanke has increased uncertainty and volatility.
Volume remains very light and attendance in the pits is low also. Lack of liquidity is creating air pockets in several areas of the market. The summer lull will continue until the crowds return to action following the Labor Day holiday. The Fed meeting where tapering will be discussed in greater detail does not take place until 9/18.
The market sold off 5.3% after the last Presidential election, the May/June tapering decline was 7.5% from top to bottom, and the recent decline has now reached roughly 3.3%. While there has been little changed in terms of fundamentals, there has been a large jump in pessimism.
Within the S&P, airlines, homebuilders, steel, and banks underperformed while retail, tech, and healthcare were leaders. Airlines were negatively impacted by an unfavorable article in Barron’s and continued profit taking in the wake of the US Airways/AMR merger issues. Banks suffered in the anticipation of lower mortgage activity if rates continue to spike. But, banks rallied in anticipation of increasing rates. If the yield curve steepens, rates increase and banks make larger spreads. Light volume leads to short-term trading patterns that don’t make a lot of sense.
Within healthcare, managed care stocks stood out. Tech stocks traded higher as the mega-cap blue chip names were in favor. Intel received an analyst upgrade and Apple continued to advance on rumors of new product launches.
Most individual sectors not mentioned above were mixed with little news flow to explain movements. There was little in the way of earnings announcements. Energy did have concerns regarding production disruption related to issues in Egypt.
Source: PFS Group
