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“You can never cross the ocean unless you have the courage to lose sight of the shore.” – Christopher Columbus
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The change in the calendar has brought with it a change in the mood of investors as stocks have traded lower on each of August’s first two trading days and are currently indicated to open lower today as well. The weakness hasn’t just been confined to US stocks either as most global benchmarks are all down on the month. Stocks in Europe have been especially weak with declines in excess of 3% in the first three trading days after more broad-based weakness this morning.
Today’s weakness comes despite some weaker than expected inflation data where PPI for the Eurozone declined more than expected (-0.4% vs -0.3% expectation). That was more than offset, though, by general weakness in the Services PMI indices. While Germany experienced better than expected growth France, Italy, and Spain missed forecasts.
Today’s economic slate in the US is jammed packed with Non-Farm Productivity, Unit Labor Costs, and Jobless Claims at 8:30. Then, after the open we’ll get updated Services PMI data from S&P and ISM. Along with those reports, we’ll also get updates on Factory Orders and Durable Goods. Besides all the economic data, don’t forget that both Amazon.com (AMZN) and Apple (AAPL) will report after the close.
531 years ago today, Christopher Columbus set sail heading west from Spain in search of a western route to China. For the next 70 days, Columbus sailed the uncharted seas with no sight of dry land until he reached what is thought to be the Bahamas on October 12th, 1492. For most people, it’s hard enough, even with Waze, to get around their own city, but looking back at Columbus’ voyage, one can only imagine what was going through his mind travelling across the ocean with no cell phone, GPS, or even a map! It makes worrying about which way the market goes from here after a credit downgrade seem trivial, but like the quote from Columbus above, there’s no reward without risk.
Yesterday’s sell-off in US stocks moved both the S&P 500 and Nasdaq out of overbought territory for the first time since May. In the case of the Nasdaq, it was the first time since before Cinco de Mayo that the index didn’t close at overbought levels, and at 60 trading days, that streak was the longest since August 1997. Yesterday’s decline in the Nasdaq was also the worst day for the index since 2/21 and just the fourth one-day decline of 2% this year. For the sake of comparison, last year at this time the Nasdaq already had 33 one day declines of 2% on its way to 46 for the year.
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