The most-crowded trade on Wall Street persisted into Friday’s trading, and continued to add a piquant flavor to a broad market that proved about as bland as American cheese on white bread. Together, the two set the tone for what could prove to be a divisive week for Wall Street, one that will see whether momentum stocks roll over, and market averages finally capitulate to over-bought conditions, or whether critical economic data can power those averages to new highs.
Next week’s action promises to be highlighted by several readings on economic conditions. Some of them could further fan the flames of the recovery trade, while others could show more reasons to be hesitant about a consumer-led rebound.
On the plus side, investors will get a glance at a key manufacturing reading Tuesday – the ISM manufacturing index – which is expected to climb narrowly above a level of 50 when the report comes out. Fifty represents the demarcation between manufacturing contraction and expansion. The report hasn’t shown an expansionary environment since early 2008.
There’s also a look at pending home sales on Tuesday, a report that’s expected to show growth for a sixth consecutive month, something that would burnish the expectation that the housing market has stabilized, despite continuing foreclosures.
The week’s critical reading arrives amidst what could prove to be a virtual vacuum Friday, as the Labor Department releases the August nonfarm payrolls report. It’s expected to show that job cuts slowed further in the month, with job losses amounting to a pedestrian – at least by recent standards – 225,000, after a reduction of 247,000 for July. However, on the downside, the unemployment rate, which retreated unexpectedly in July, is expected to tick back up to about 9.5%, showing continued difficulties in the labor markets, and prospectively renewing worries about how quickly consumer spending is going to bounce back.
The real ! risk, th ough, is that all this comes amid a week that’ll be characterized by sluggish volume from the start, and dwindling levels as the week wears on. By the time the jobs report hits the tape on Friday, trading desks could look like a bus stop after the Hamptons Jittney loaded its passengers and headed east.
Not that volume proved all that powerful in this week’s trading – save for the handful of ”at-risk” financial stocks whose bulge in trading accounted for a freakish percentage of each day’s volume throughout the week.
The performance of the broad list matched the insipidness of the volume. The S&P 500 index(GSPC)added 3 points.
For the week. Five trading days – three of whichresulted in gains – amounted to a 3-point move cumulatively.
And in the midst of that, a handful of financial stocks traded at ridiculously inflated levels. Shares of Citigroup (C)rose another 4% as 1.35 billion shares changed hands in the session. American International Group (AIG)added 5%, part of whatproved tobe a 53% advance this week alone that carried the stock over $50 a share. Fannie Mae (FNM)increased 6%, part of this week’s 70% surge in the market value, which carried the stock above $2 a share for the first time since September.
Whetherthe rally in these at-risk financials, which – let’s admit – traded with virtually no tether to the underlying fundamentals this week, end up rolling over may determine much of the character of trading in the week leading up to the Labor Day holiday.
No comments:
Post a Comment