Saturday, September 5, 2015

Week In Review (8/31/15 - 9/4/15)

U.S stocks capped off a tough week with another session in the red yesterday.  The S&P 500 finished down about 1.5% on Friday and lost 3.4% for the week.  The Nasdaq held up slightly better by losing only 1.05% yesterday and 3% over the course of the week.

Concern over China's slowing economy was once again a big theme this week as investors have been impacted by recent negative headlines coming out of the region.  On Tuesday, it was reported that manufacturing activity in China had fallen to a 3-year low and many are concerned about how this may impact China's regional neighbors like South Korea and Austrailia.  So while the larger cap, multinational-led indexes struggled this week, small cap stocks actually fared a bit better as they're less reliant on foreign customers.  The Russell 2000 fell only 2.3% for the week and displayed some decent relative strength against its large cap counterparts.

Yesterday's losses were preceded by, and likely attributable to, an unexpectedly weak August jobs report.  Per Reuters:

"Nonfarm payrolls increased 173,000 last month, fewer than the 220,000 that economists polled by Reuters had expected. But the unemployment rate dropped to 5.1 percent, its lowest in more than seven years, and wages accelerated. Many investors viewed those data points as contradictory signals about the urgency to increase interest rates."

The number gave investors even more confusion over whether the Federal Reserve was preparing to raise interest rates at their next meeting September 16-17.  Futures traders have backed off their certainty in recent weeks as the implied probability of a rate hike has dropped from over 50% to near 30% over the last month.

The Nasdaq remains the clear leader on a year-to-date basis as it fights to stay near-flat.  The remaining U.S. stock indexes have fallen decidedly into negative territory.

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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