Bargain hunters should be well aware that Wall Street’s two per cent weekly declines might not be buying enough opportunities for stocks which it intends to.
The stock market will begin this week and it was further spooked by the US Federal Reserve’s arrangements for decreasing its stimulus attempts, rallied for quantitative easing or QE.
The last two weeks that preceded this one brought huge Intraday movements and volatility as asset managers reevaluated their portfolios to adjust to the new administration of diminishing support from the Fed.
The CBOE Volatility Index, which is Wall Street’s benchmark in fear rose 10.2 % recently, ending the week at 19 %. The index has risen in four out of the past five weeks since the Fed chairman first mentioned the phasing out of the said stimulus.
With Fed is positioning the market on active notice that it will be eventually withdrawing from easy money, investors are going to look at the wider picture which has a lot of warning signs. Economic growth remains blemished and Chinese Markets are manifesting stress with the interest surging high.
The primary reason for equity investors on why they are very apprehensive is the second-quarter earnings outlook. Earnings warning from companies for the second quarter outnumber positive outlooks 6.5 to 1, the most pessimistic ratio since the first quarter of 2001 a decade ago according to a survey conducted by Reuters.
Among the sectors with the worst outlooks for the second quarter, consumer discretionary is among the top contenders in the list, with 21 warnings and just two positive outlooks. Technology was another, with 27 warnings and 6 positive outlooks, as seen in the Reuters survey report.