Regardless of the volatility induced by Friday’s options expiration (as if the market needed any further motivations), it can’t be a good sign that an increase in trading volume pushed stocks lower.
It’s also probably not good – for bulls, anyway – that stocks had a mind of their own Friday, independent of the recent dynamic of stronger dollar/weaker commodities/stocks fall that has been the central theme since a selloff in equities began this month.
The Dow Jones Industrial Average lost 93 points to 12,512, the Nasdaq fell 20 points to 2803 and the S&P 500 slipped 10 points to 1333.
Commodities were generally higher, finishing in the green after starting lower on another rally by the dollar, which eventually reversed course. Crude oil settled back above $100 a barrel, while gold and silver gained 1.2% and 0.4%, respectively
As has been the case this month, however, the combination of the recent downtrend in stocks and the typical lighter newsflow has come to make Fridays a day of reflection for traders, and for the second Friday in a row, that has meant a down day for stocks.
The legitimate concerns are well-covered, of course, continual risk profiles out of Europe and the Middle East (although for different reasons), continued high levels of unemployment and a stagnant real-estate markets, as well as what still-high food and energy prices mean for every other company trying to get a piece of consumers’ dollars.
Not that there weren’t specific bummer s on Friday: Gap (NYSE:GPS) shares plunged more than 17% after the company’s quarterly profit report late Thursday, which included a warning that full-year profit wouldn’t come close to current Wall Street estimates, as costs would exceed what the company had originally expected. Aeropostale (NYSE:ARO) also added a dour outlook to the retail sector, and its shares plummeted 14%.
Leaving aside the much larger question of whether these are some of the initial digs into the idea that historically high profit margins have no chance of being sustained, it was at least enough for investors who have now seen no appreciation in stock prices in more than three months to worry about where the next push higher will come from.
As a kicker, we’ll throw in Friday’s selloff in large-cap financial stocks as another ominous move. The Financial Select Sector SPDR (NYSE:XLF) exchange-traded fund lost 1.4% to fall to its lowest level in five months.
It’s reasonable to expect lighter volume next week leading into a holiday weekend could be positive for the major indices. But their longer-term prospects, for now, seem less sanguine.
