SPX: close to oversold momentum
The S&P 500 continued to be in a correction mood during the previous week. Friday`s surprising jobs data pushed the index to the lowest weekly level at 5.308. Still, the index is finishing the week at the level of 5.346. A weaker than anticipated jobs data, with Non-farm payrolls dropping to the level of 114K, from anticipated 175K and unemployment rate at 4.3% in July, from expected 4.1%, increased the fear among investors that the US economy is slowly slipping into a recession. It also increased their expectations that the Fed might cut rates in September. However, some analysts are not excluding seasonality effects in the posted jobs data, in which sense a market`s Friday's moves might be overreacted.
The majority of stocks finished the week in red. The financial sector shares were traded lower on fears of a potential recession, while tech companies are currently perceived by the majority of investors as overestimated, taking into account current market levels. On the other hand, news hit the market that the market favorite, Nvidia, is under investigation by the US Justice department over a potential antitrust case. Intel shares had the worst week for the last 50 years, dropping down to the levels from 2013, after the company underestimated its earning potential, hence it will need to go through a tough process of restructuring, including layoffs of 15.000 employees. Intels shares dropped from the level of $30,64 reached on Thursday, to $20,79 traded on Friday, and has current market capitalization below $100 million. Another important news hit the market, was that Warren Buffet`s Berkshire Hathaway halved its position in Apple shares, through sale of around 50% of its previous position in this company. This information is derived from Berkshire Hathaway quarterly filings, but the company itself did not make any comments on such a move, so the reason for shorting position in AAPL is currently unknown.
Another important aspect, which should not be neglected when it comes to the US market, is investors carry trade in Japanese Yen. Traditionally, changes in Japanese monetary policy had an impact on the US stock markets. During the previous week, the BoJ increased its reference interest rate by 25 basis points, which pushed the Yen 8% higher against the US Dollar. The carry trade is traditionally used by investors, where they take a debt in currency with lower interest rates and invest it in the US stock market in expectation of higher returns on their investments. Increased interest rates by BoJ and stronger Yen will certainly impact some currently open positions to be closed.
The majority of stocks finished the week in red. The financial sector shares were traded lower on fears of a potential recession, while tech companies are currently perceived by the majority of investors as overestimated, taking into account current market levels. On the other hand, news hit the market that the market favorite, Nvidia, is under investigation by the US Justice department over a potential antitrust case. Intel shares had the worst week for the last 50 years, dropping down to the levels from 2013, after the company underestimated its earning potential, hence it will need to go through a tough process of restructuring, including layoffs of 15.000 employees. Intels shares dropped from the level of $30,64 reached on Thursday, to $20,79 traded on Friday, and has current market capitalization below $100 million. Another important news hit the market, was that Warren Buffet`s Berkshire Hathaway halved its position in Apple shares, through sale of around 50% of its previous position in this company. This information is derived from Berkshire Hathaway quarterly filings, but the company itself did not make any comments on such a move, so the reason for shorting position in AAPL is currently unknown.
Another important aspect, which should not be neglected when it comes to the US market, is investors carry trade in Japanese Yen. Traditionally, changes in Japanese monetary policy had an impact on the US stock markets. During the previous week, the BoJ increased its reference interest rate by 25 basis points, which pushed the Yen 8% higher against the US Dollar. The carry trade is traditionally used by investors, where they take a debt in currency with lower interest rates and invest it in the US stock market in expectation of higher returns on their investments. Increased interest rates by BoJ and stronger Yen will certainly impact some currently open positions to be closed.
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