4 Reasons U.S. Stocks Had The Worst Week All Year (Ended April 5 2012):
Last week was the worst so far for stocks in 2012. The major U.S. averages all trended downward back to levels before Fed Chairman Ben Bernanke gave hints that more quantitative easing was in the pipeline. The announcement helped markets jump up to new levels and this week the S&P 500 reached a four year high intraday.
The uncertainty about QE3, Europe and unemployment outweighed positive news about car sales. Construction data showed weakness and although economic trends may remain mixed positive, this wasn’t enough to give bulls more reasons to make outlays for new equity positions.
4 Reasons Stocks Had The Worst Week All Year (Ended April 5 2012):
- It was a short week. This week there was no trading on Friday due to Passover and Easter so traders were forced to get out of positions they believed could be impacted by a negative jobs report which was set to be released on a day when the markets would not be open – April 6, 2012.
- Spanish and French bond auctions lackluster. Europe has been on the back burner for the past few weeks and when economic news in the U.S. fails to help traders make long term bets, volatility fluctuates and traders tend not to stay in positions they aren’t ready to liquidate quickly.
- Initial jobless claims marginal again. Jobless claims fell by 6,000 but not by a level large enough to keep traders locked in for the unemployment report that was reported yesterday that ended up being a disappointment. The trend in jobs growth is positive but the rate of change isn’t impressive enough to suggest the economy is back on track to grow faster. Follow through occurred yesterday when jobs data showed the U.S. economy only added 120,000 as opposed to the 200,000 most economists were expecting. We say relatively little evidence the numbers would be so low but factoring in the gains from initial jobless claims which weren’t large this month for any week- it seems more plausible now.
- FOMC Minutes cause QE3 uncertainty. Lastly, the FOMC Minutes released earlier in the week kept investors worried about the possibility of QE3 and whether it was necessary or not. Later on in the week, most market participants were wondering why QE3 hadn’t been done already when most recessions cause pent up demand and bounce back at 4 -5 percent.
The market could move rangebound or be in correction mode if traders believe uncertainty about QE3 could permeate market sentiment with more mixed economic data on the way. We are looking carefully at U.S. technology equities volatility and major indexes overseas.
Stay tuned for out technical analysis notes tomorrow!