As the long, hot summer drags on, stocks remain mired in a trading range. For the second week in a row, U.S. stocks closed about where they started. Investor sentiment reflected a continued decline into complacency as fear eroded still further.
Monday, Asian stocks fell nearly 2% in reaction to negative U.S. employment news from the previous week. Europe closed down about 0.5% on slow-down worries. From the bloated stock department, Facebook continued to defy gravity, while IBM succumbed to a limited level of reason—closing below $190 per share.
Tuesday, stocks in Asia declined less than 0.5% on weak economic data from China. Stocks in Europe moved up a bit more than 0.5% as the finance ministers (not countries) agreed to expedite aid to Spain. Negative corporate outlooks sent stocks in the U.S. down nearly 1% on low volume.
Wednesday was a non-event with respect to stock market movement. Spanish and Italian 10-year government bonds did make a big decline below 6%. With quarterly earnings reports coming due, IBM must come up with a new song and dance. The strong dollar only exacerbates IBM’s challenges. The erosion of its stock price that began a few months ago lends evidence that investors may finally be starting to catch on. Here’s an article that supports that view. Of course, a declining IBM price creates strong headwinds for the Dow Jones Industrial Index and to a lesser extent for the S&P 500 Index.
Thursday proved to be another negative day. Asia declined more than 1%, Europe about 0.75%, and the U.S. about 0.5% on a weak business outlook and discouraging economic data. U.S. stock trading volume was low to moderate.
Friday we very likely witnessed an orchestrated short squeeze. The action came after Asian markets closed flat. Stocks in Europe and the U.S. closed up over 1.5% on low volume for no good reason. To think that a net negative earnings report from JP Morgan could cause this move is laughable. With the legal right to lie with impunity, it’s bizarre that anyone would take their quarterly report seriously. Like fireworks, these types of bogus moves tend to burn themselves out quickly, and this one should be no exception.