Saturday, November 23, 2024
Markets fell dramatically on Friday to conclude the worst week for stocks since April, and the second biggest weekly decline since this rally began back in October. Does this spell the end of the rally? Does it mean we are headed into a correction or bear market even?
Maybe. Probably not but maybe. We think that the markets were headed for a bit or a bounce back rally on Friday but got spooked—reasonably spooked—by the widespread computer outages across the country due to the CrowdStrike update bug, but even if we are right, the damage has been done. Will the lower stock prices attract buyers and new money? Or more sellers? That’s an open question and remains to be seen.
Regardless of where stocks are headed next, I think it’s a good time to review how far we’ve come.
By our reckoning, this rally began on Monday, October 30th of last year. On Friday, the 27th of October, the S&P 500 closed at 4,117, down 20 points.
This past Friday, after three pretty dramatic down days, it closed at 5,505. That’s a total return of 33.71%, not including dividends and an Annual Percentage Rate return of over 83%. And again, those numbers come after, at the end of, a brutal week.
As of Friday, the rally is thirty-eight weeks old, ten of which have been down weeks, so this past week is hardly out of the ordinary.
And, so far, as dramatic as it has been, it hasn’t been out of the ordinary. Indeed, the rally that began as the economy began to emerge from the pandemic, in March of 2020 and which didn’t correct until December of 2021, saw the S&P rise from 2,234 to 3443, was perhaps more dramatic and long-lived. And there are dozens of other examples in recent history.
So, where is this market headed next. As regular listeners know, we don’t make predictions on the Buzz on Business, indeed it is central to our schtick to ridicule those who do. But up, down or sideways, we can celebrate American business and financial markets and get ready for the next big rally, because it’s coming.
By the way, this rally began three weeks after we published the very first episode of this podcast so, you’re welcome.
A marked sell-off on Friday but it was an orderly retreat, and volume fell on the session. As we said, we believe it had more to do with the nationwide computer network failure than any change in the fundamentals.
Bonds fell in sympathy with stocks as rates were up across the board.
Other than the CrowdStrike computer snafu, Friday brought us no news that could have moved the market, although that was surely enough.
Eight companies reported earnings on Friday, all met or exceeded expectations for the 2nd quarter's bottom line although we have got to say that we remain concerned about the top line numbers. Four of those companies missed expectations for sales. This is indeed becoming a troublesome trend.
Earnings season continues to ramp up as over the next two weeks we expect dozens upon dozens of reports. Among them are Google, Tesla, Facebook, Microsoft, Apple, and Amazon. That’s six of the Magnificent Seven companies. The only one missing is NVIDIA which reports in late August.
In addition to those, we’ll be interested in Boeing’s numbers. The embattled company is expected to report on Wednesday and the Street anticipates it lost $1.52 per share on sales of $17.4 billion.
There were no releases from the economic calendar on Friday, but we have got a busy week ahead which culminates with the release of the Gross Domestic Product Report on Thursday and the Personal Consumption Expenditures Index, the Fed’s preferred measure of inflation, on Friday.
Vacations, personal days, even sick days have all been cancelled here at the Ministry of Truth so that we can do what we do and read, listen, watch, analyze and report all of it, to you, here on the Buzz.
