Friday was a healthy pullback after stocks left Wednesday the most overbought in a year. Some Fed officials made mention that there still might be some tapering later this year but that was mostly an excuse to pull back rather than a reason. The S&P 500 fell 0.72% and the NASDAQ 0.39%. Despite the losses both indexes finished up between 1.3% and 1.4% for the week with almost all of that happening in seconds Wednesday afternoon after the Fed announcement. Most of the news on the day was company specific rather than major macro news.
The indexes are both in fine shape - they were extremely overbought mid week and now have pulled back to a more reasonable level. A day or two more of this next week and some of the euphoria will have been worked off.
We can see with the NYSE McClellan Oscillator we had a reading seen not since last summer; usually a reading of 60 is enough to cause a pullback but the Fed announcement caused an overshoot. Now we have seen this drop over 50 points in 2 session.
The big news of the day was with Blackberry (BBRY) which unleashed a bomb late in the day, with 4500 job cuts and a big increase in losses.
The company said its sees a second-quarter loss excluding items of 47 cents to 51 cents per share, more than the 27-cent loss per share share in the year-earlier period. It expects revenue to decline to $2.6 billion from $3.1 billion a year ago. Analysts had expected the company to report a loss excluding items of 15 cents a share on $3.06 billion in revenue. BBRY will slash 4,500 jobs, or above 40 percent of its workforce.
Real estate internet company Zillow (Z) was also a big loser as noted short selling firm Citron attacked it. Citron is certainly an interesting company as it is one of a few firms who short stocks in large quantity before unleashing scathing reports, causing many investors to panic - thus creating a fast and large profit for themselves.
Shares of real estate website Zillow Inc fell as much as 10 percent on Friday after short-seller Citron Research questioned its business model for the second time in a year and noted that senior executives have been selling the stock. Zillow shares, which have tripled in value this year, fell after Citron said the company was spending huge amounts on marketing to push up sales. "Zillow spent more getting revenue than the revenue itself. Is this a business?" Citron said in its report. Zillow rejected the claim that it was buying an audience, saying website traffic had jumped 75 percent in the past year and revenue was up 69 percent. In the quarter ended June 30, Zillow's sales and marketing expenses were 70 percent of revenue, up from 44 percent a year earlier.
Internet real estate peer Trulia (TRLA) was also hit.
On the plus side, 3 of our 4 "horsemen" of 2013 continued to act as if the market were up 1% today - look at these incredible moves by Netflix (NFLX), Facebook (FB) and Tesla Motors (TSLA) - remarkable.