Friday equity market wipe-out, ephemeral maybe but definitely getting attention
On Thursday there was a post here that began with the sentence, "It feels like the U.S. equity market wants to go down". On Friday it did drop decisively after a firm start in the early morning. Heck, jinxing the markets was not the purpose of the day before comment here. One should note, however, that for the week the Dow and the S&P were still up modestly, while the Nasdaq was down a mere 0.7%.
It has been mentioned in almost all analyses of Friday's carnage that most of the hardest hit were high flyers, harking back to the days of momentum stocks. Biotech, social media, and tech titans fell victim to a defensive profit taking sell-off. It's not that simple as I survey stocks followed closely here. Some transportation names that had been on a run for the last year backed off substantially and credit card processors like Visa took a notable whack.
Among tech stocks the mighty Google stood out with almost 5% losses in Goog and Googl. Here it is believed that many investors don't fully appreciate the purpose of the split into a new class of shares. What is not understood is generally not bought. Facebook has been on a several week leak of market cap after yet another full price acquisition. Yahoo's comeback from the dead is now reeling as the allure of a sustainable turnaround by management brilliance is questioned. Linkedin and Twitter backtracked from significant gains in 2014, while Apple continues its Rodney Dangerfield impression, "can't get no respect". Those are the low points of yesterday, but there was really no place to hide.
One could guess that the book promotion crusade by Michael Lewis has shaken the market faith of some, particularly retail investors. Even institutional investors that may know more than Lewis about high frequency trading could pause as they consider the repercussions of this avalanche of coverage of his new book that proclaims that ''the stock market is rigged". Lewis led off his time on "60 Minutes" this past Sunday with that comment, dramatically presented several times by CBS. The New York Times is fawning over Lewis as well, with a major excerpt from the book in this Sunday's Times Magazine plus other articles and op-ed pieces that make for major coverage. Then all of that hoopla was followed yesterday by Eric Holder making sure everyone knew that the Justice Department was examining the practice. When does a popular book writer elicit such a gratuitous government response.
With the general investing population, aka retail, still skeptical of the financial system after events of the last five years and a President who cannot criticize the private financial system enough, this does not help with confidence and gives know-it-alls on the right and left a new soapbox to stand on. This brouhaha should pass as parts of Lewis's book are exaggerated and those institutional "lead steers" of the market know it. That Lewis has provided de facto encouragement to retail investors to lock in their economic losses in bonds and money market funds with his frenzy of self promotion is unfortunate. Lewis is a clever guy and a talented writer, but this is not his finest moment.
Next week will be interesting and may start out slow, or even as a continuation of Friday's negative trend at first, but buyers should be waiting to make a move at some point.
It has been mentioned in almost all analyses of Friday's carnage that most of the hardest hit were high flyers, harking back to the days of momentum stocks. Biotech, social media, and tech titans fell victim to a defensive profit taking sell-off. It's not that simple as I survey stocks followed closely here. Some transportation names that had been on a run for the last year backed off substantially and credit card processors like Visa took a notable whack.
Among tech stocks the mighty Google stood out with almost 5% losses in Goog and Googl. Here it is believed that many investors don't fully appreciate the purpose of the split into a new class of shares. What is not understood is generally not bought. Facebook has been on a several week leak of market cap after yet another full price acquisition. Yahoo's comeback from the dead is now reeling as the allure of a sustainable turnaround by management brilliance is questioned. Linkedin and Twitter backtracked from significant gains in 2014, while Apple continues its Rodney Dangerfield impression, "can't get no respect". Those are the low points of yesterday, but there was really no place to hide.
One could guess that the book promotion crusade by Michael Lewis has shaken the market faith of some, particularly retail investors. Even institutional investors that may know more than Lewis about high frequency trading could pause as they consider the repercussions of this avalanche of coverage of his new book that proclaims that ''the stock market is rigged". Lewis led off his time on "60 Minutes" this past Sunday with that comment, dramatically presented several times by CBS. The New York Times is fawning over Lewis as well, with a major excerpt from the book in this Sunday's Times Magazine plus other articles and op-ed pieces that make for major coverage. Then all of that hoopla was followed yesterday by Eric Holder making sure everyone knew that the Justice Department was examining the practice. When does a popular book writer elicit such a gratuitous government response.
With the general investing population, aka retail, still skeptical of the financial system after events of the last five years and a President who cannot criticize the private financial system enough, this does not help with confidence and gives know-it-alls on the right and left a new soapbox to stand on. This brouhaha should pass as parts of Lewis's book are exaggerated and those institutional "lead steers" of the market know it. That Lewis has provided de facto encouragement to retail investors to lock in their economic losses in bonds and money market funds with his frenzy of self promotion is unfortunate. Lewis is a clever guy and a talented writer, but this is not his finest moment.
Next week will be interesting and may start out slow, or even as a continuation of Friday's negative trend at first, but buyers should be waiting to make a move at some point.
posted by John Borden at 3:07 PM
0 Comments:
Post a Comment
<< Home