Market Pros Say Stocks Could See Further Near-Term Weakness
Recent downside moves in the stock market are not likely over, market pros said, but the long-term outlook on equities remains positive.
"I don't think it's over," said Tom Schrader, managing director of U.S. listed trading at Stifel Nicolaus. "The technical damage was significant with breadth severely to the downside."
The Dow Jones Industrial Average fell 1.5%, down almost 200 points. It was the biggest one day point and percentage drop since March 13 and third-steepest decline this year. The S&P 500 and the Nasdaq Composite each lost about 1.8% on Thursday.
"When it's this severe, we get oversold quick so next week you may see some positive action as some people start to pick at that," Schrader added. "We may get a bounce tomorrow morning but it's Friday and people in this action would not want to be long over the weekend."
For the past six to eight weeks, the trader noted, investors have been going into the weekend with long positions on expectations of mergers news announced prior to Monday's start of trading, and for the most part, they have not been disappointed.
"We're going to see a shift back to the normal view of not wanting to be long over the weekend," Schrader said. "You may see some up action early (on Friday) but I think it'll sell off in the latter part of the day."
Tim Hartzell, chief investment officer at Kanaly Trust, expects weakness to hit the markets early on in Friday's session.
"It'll be on the weaker side probably first thing tomorrow," he said. "This will probably go around the world and come back to New York. We ended at the lows, it looks like it'll have a little follow through tomorrow."
The money manager expects stocks to weather the current downturn but how the market behaves after that, he says, should be revealing.
"It will be important to watch the next bounce up and how we fiddle through it," Hartzell said. "We'll get through this OK. There's enough liquidity in the world and enough growth in the world for us to get through this fine."
"It's not surprising the market sold off, it was due for a breather," said Jason Trennert, chief investment strategist at Strategas Research Partners. "The fundamentals are still supportive and this is probably a healthy correction the market needs, given how far it has come.
"The good news is that is that there is still value in the market," Trennert said. "I would find it hard to bet against the market right now."
"It'll be a buying opportunity, we've recovered from 5% corrections in the past, why should this be any different?," David Sowerby of Loomis Sayles, told CNBC.
Still, other market strategists were not as sanguine.
"I think this is just the start of what's probably the long-awaited correction," said Chris Orndorff, portfolio manager at Payden & Rygel. "I think you're likely to see maybe a 10% drop from the highs."
Peter Kang is a markets writer at CNBC.com. He can be reached at firstname.lastname@example.org.