Saturday, July 25, 2015

Week In Review (7/20 - 7/24)

Stocks struggled this week as the S&P 500 was down 4 out of 5 days and finished -2.21% lower from last Friday's close.  Meanwhile, the Dow Jones Industrial Average suffered its largest 1-week drop since December.  Friday was the ugliest day of the week as Biotech stocks like Biogen were hit hard. Biogen was down 22% for the day after issuing disappointed guidance in its quarterly earnings release.  The Nasdaq Biotechnology index was down more than 4% for the week.  This was more than enough to offset the market's glee over Amazon's earnings.  The stock opened trading Friday 20% above Thursday's closing price.  However, those gains were halved during the trading day as the weight of the market pulled it back into the atmosphere and it finished "only" 9% higher.

As the Wall Street Journal noted today, the market has, in recent weeks, seemed to pay less attention to macro events which has allowed investors to focus more on company specific news:

"The focus on individual companies marked a turnaround from earlier this month, when all eyes were on developments in Greece’s bailout talks and China’s tumbling stock
On Friday, dour economic news from China helped accelerate a gathering commodities-market rout, but investors said the big factors driving stocks were earnings-related, perhaps to a fault.
“The market has taken a break from the macro[economic] and is focusing more on the company level,” said Tom Digenan, head of U.S. equities at UBS Global Asset Management. “If you have a bad quarter, that doesn’t necessarily project that things will be all bad going forward, but the market seems to be playing that.”"


This week's stumble for the stock markets knocked off some of the shine on what was shaping up to be a really strong month.  The S&P is now up just 0.8% for July after being up 3% as of last Friday.  Thanks to some very positive earnings reports by tech giants like Netflix, Google and Amazon, the Nasdaq is still higher by 2% for the month.

Sector-wise it was another tough week for Energy as the space was down another 2%.  Cyclicals, Consumer Staples and Financials held up rather well in the face of the selling in the broad indexes.

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

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