In a week that was dominated by the discussion surrounding the minutes from the FOMC’s July meeting, the Dow Jones Industrials fell 0.5% to $15,010 and extending its slide to a third week, the longest since November. The S&P 500, however, gained 0.5% to 1,663.50, ending its two-week losing streak.
Bloomberg The mixed market is a perfect symbol of the confusion in the market right now. Will the Fed begin tapering in September or in December? Will rising Treasury yields be good or bad for the stock market? Are stocks expensive or cheap?
None of those questions were answered this week, and don’t expect much to change next week either. Earnings season, for all intents and purposes is over. Wall Street is on vacation. Even the Fed’s annual conclave at Jackson Hole this weekend, which in past years has been the precipitating event that sent stocks shooting higher in 2011, could be a nonevent with a lame-duck Ben Bernanke taking a pass on speaking this year.
So where might markets be headed? How about nowhere? Citigroup’s Tobias Levkovich explains:
We believe that 2H13 may prove more challenging for equities given optimistic back half Street EPS estimates that may need trimming, the impact of likely Fed tapering and a search for new sector leadership. Credit conditions are not sending warning signs weaker emerging economies and Europe are holding back the hoped for second half market leadership handoff from US-oriented names to more global cyclical ones…Valuation remains attractive, while implied long-term earnings growth expectations have stayed subdued. Buyback activity has stepped up and money has begun to flow into equity funds. Hence, the market may be range-bound until year-end, but the index could hit 1,825 by mid-2014. Accordingly, we remain generally constructive with some nearer term caution.
Despite the defensive tone to the market, however, defensive sectors underperformed. Consumer staples, for instance, were the worst performing sector this week, as Archer-Daniels-Midland (ADM) fell 2.6% to $36.28 and Kroger (KR) dropped 1.9% to $37.53.
The best-performing sector, meanwhile was the “riskier” materials, which gained 1%. The sector was led higher by coal-miner Consol Energy (CNX), which gained 8.1% to 33.23 this week, and Dow Chemical (DOW) which rose 5% to $38.74.
AMR (AAMRQ) bounced back a bit this week. Its shares gained 15% after losing more than half its value last week. After the close today, the judge who will preside over the trial said he will hold a scheduling hearing next week. AMR wants it to start in November; the Justice Department in February 2014 September.
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