The August correction continued during a volatile session Friday. The yield on 10 year Treasury bonds broke over 2.8% and unlike yesterday stayed their today; this upward skew in yields was the initial cause of the May-June correction and it is sort of repeating itself as worries about "tapering" continue to hit the market. The indexes have fallen quite substantially already (over 3%) versus their recent peak and within downturns often come violent rallies so if one happens next week be aware. With the damage done this week, it is going to take more than a quick violent upward thrust to heal things. The S&P 500 fell 0.33% and NASDAQ 0.09%; again Apple helped the latter index out. For the week the S&P 500 fell 2.10% and the NASDAQ 1.57%. Two economic reports on the day:
The consumer sentiment index slipped to 80 in August from 85.1 in July, according to the Thomson Reuters/University of Michigan's preliminary reading on the overall index. Housing starts rose 5.9 percent to a seasonally adjusted annual rate of 896,000 units in July, according to the Commerce Department, which was less than the expected 900,000 unit rate expected by economists polled by Reuters.
We now have 2 broken charts at the index level. When an oversold bounce happens it will be key to monitor where it goes to, and if it has any duration past a few days. If so, then you might be ready to resume an uptrend; if not - then after that bounce a new leg down should occur. Note the gaps in green on these charts - these are areas these indexes may eventually go revisit. As for any bounce they could potentially go back up to get near or test the bottom blue dotted line. We can see the S&P 500 continues to underperform as it is already at the 50 day moving average while the NASDAQ is nowhere near.
Here is a chart of that 10 year yield, a move to 3% would be interesting to watch in terms of psychology.
When we have downturns like this, most stocks tend to sell off en masse so analyzing individual stocks becomes less useful. That said here are a few names that stood out - first Apple (AAPL) which we mentioned earlier this week, as well as Chinese travel company Ctrip.com (CTRP) - also mentioned. When this selloff finishes one wants to note the names that held up the best as they usually lead the next leg up.
Another area doing relatively well believe it or not are European stocks as money seems to be moving from the U.S. to Europe with the idea that there multi year recession may be ending. Here is a major bank stock based in Europe - Credit Suisse (CS).
We can see with our sector analysis the same things in sectors - here we see industrials are holding up relatively better than the S&P 500 which is already at its 50 day moving average. But financials are right in line with the index so no relative strength. That said if there is another wave of healthy selling it won't really matter which sector you are in as they will move downward together.
Earlier this week we mentioned results from Macy's the market did not like - today another major retailer, Nordstrom (JWN) had the same issue.
Nordstrom reported earnings today and investors are not pleased, as guidance was light and same-store sales weak. The luxury retailer reported that comparable sales in the quarter ending Aug.3 rose 4.4 percent from the year-ago period, below the 6.8 percent increase analysts were expecting, according to Thomson Reuters I/B/E/S. Overall sales rose 6.4 percent to $3.1 billion. For the full fiscal year, which began Feb. 3, Nordstrom revised its outlook and now expects same-store sales to rise 2 to 3 percent, compared with an earlier projected rise in the range of 3 to 5 percent.