Stocks Slide but Gain Over 1% for August
Stocks declined Friday as Dell shook up techs and Gustav rattled the market. But, as the summer comes to a close, some analysts are seeing a silver lining in the clouds.
All three major indexes finished lower this week, as oil advanced and no resolutions emerged from the financial sector, but gained more than 1 percent for August, with the Nasdaq up nearly 2 percent for the month.
The bond market closed at 2pm ET Friday ahead of the Labor Day holiday. All U.S. financial markets will be closed on Monday.
If you take a step back and look at the Dow chart for the summer, it's a wide V: Stocks skidded for the first half of the summer, touched down in mid-July and then began to recover on a shallow incline.
Some market watchers are looking to see if we retest those mid-July lows but Vince Farrell, chief investment officer at Soleil Securities Group said the bear bottom might be behind us. "The further away and the higher we get from the lows of July make the likelihood of revisiting those levels less likely," Farrell wrote in a guest blog post on CNBC.com.
Another trend has emerged: The number of new lows has dropped significantly, observes Jordan Kimmel, portfolio manager for Magnet Investment Group. "This means that we have an absence of downward pressure, and this is how big rallies begin to take place," Kimmel explains.
This is just an early sign, Kimmel says, and what needs to happen to get the market firmly on an upward trajectory is "significant sector leadership." He sees that possibility in health care, alternative energy and, to a smaller degree, in technology.
Indeed, there was cause for optimism heading into the long holiday weekend. However, Dell threw a monkey wrench into that, warning of "conservatism" in tech spending. Techs had been where traders were putting their money when they sold energy and materials stocks. If the outlook for techs isn't certain, what then?
And, let the investor beware: September is known as being the worst month of the year.
Light, sweet crudesettled at $115.46 a barrel, just a few cents shy of Thursday's close as a stronger dollar balanced worries about Tropical Storm Gustav's impending arrival in the Gulf Coast.
Oil is up about $1 from where it ended last Friday as it has become increasingly clear this week that Gustav could slam oil refineries in the gulf. Still, it's down about $10 for the month of August as the dollar has strengthened.
(What does McCain's pick of Alaska Governor Sarah Palin for his VP running mate mean to the market? Click on the video at left.)
Trading has been extremely light during this last week of summer — about half the daily average — as a lot people crammed in vacations or took time off to get the kids ready for school. Gustav's appproach and continued uncertainty in the financial sector certainly didn't offer any incentive for those traders who were in the office to amp up their activity.
Dell shares skidded 14 percent after the computer maker released disappointing quarterly numbers after the bell Thursday. Analysts said Dell just cut prices too much in an attempt to grab -- or buy -- more market share. Dell's comment that spending cutbacks on information technology have spread from the U.S. to Western Europe and Asia rippled through the sector.
Chip stocks dropped 2.8 percent after Marvell Technology beat earnings expectations but delivered a tepid outlook for the third quarter. Marvell chips are used in Apple's iPhone and Research In Motion's BlackBerry devices.
Shares of Novell bucked the tech trend, climbing 7 percent, after the business software maker topped forecasts, boosted by a jump in sales of Linux software, and raised its outlook for 2008. Novell is the world's second-largest seller of Linux software after Red Hat .
The market was all abuzz about Lehman Brothers , with analysts noting that a long, three-day weekend would be a perfect time for a buyer to sweep in and take over Lehman. Lehman shares climbed about 1.3 percent, bringing it up 14 percent for the week.
Shares of Fannie Mae and Freddie Mac took a breather, falling about 14 percent apiece after a dizzying ascent in the past week amid the increasing belief that the home-financing giants may not need a bailout and the stocks may not get wiped out. Even with today's declines, Fannie is up 37 percent for the week and Freddie Mac, up 57 percent.
That optimism has given a boost to financials, the week's best performers with a 3 percent gain. Technology stocks were the worst-performing sector, down 3 percent for the week.
General Motors shares slipped 3.3 percent after the auto maker recalled nearly 900,000 vehicles equipped with a heated windshield-wiper-fluid system that was prone to short circuiting.
In economic news, consumer sentiment hit a five-month high, the University of Michigan reported. Personal income fell 0.7 percent, according to the Commerce Department reported, as spending ticked up 0.2 percent. The Institute for Supply Management's Chicago business barometer jumped to 57.9 in August from 50.8 in July.
Looking ahead to next week, financial markets are closed on Monday. The Republican National Convention begins on Tuesday. Not much in the way of earnings except for a few homebuilders. Next week brings some big economic numbers, including the ISM manufacutring report on Tuesday, the Fed's beige book report on Wednesday, the ISM services report on Thursday and the August jobs report on Friday.
The jobs report will be most closely watched of next week's data points. Economists expect to see nonfarm payrolls drop by 75,000 jobs and for the unemployment rate to come in at 5.7 percent.
MONDAY-THURSDAY: Republican National Convention
MONDAY: U.S. financial markets closed for Labor Day
TUESDAY: ISM manufacturing; construction spending
WEDNESDAY: Weekly mortgage applications; ADP employment report; factory orders; crude inventories; Fed's beige book; Earnings from Staples, H&R Block and Hovnanian
THURSDAY: Monster employment report; jobless claims; productivity; ISM services index; Fed's Yellen speaks; Earnings from Toll Brothers
FRIDAY: August jobs report; earnings from Nat Semi
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