Stock Market Fades As Uncertainty Rises

It has often been said that there is nothing that the stock market hates more than uncertainty. On Friday, ongoing uncertainty about whether or how the United States will respond to the Syrian chemical weapons attacks kept investors in a risk-averse mode. Downbeat economic data helped fuel the bearish sentiment.

The Commerce Department’s Bureau of Economic Analysis reported that both personal income and consumer spending rose by only 0.1 percent in July, despite expectations for increases of 0.2 percent and 0.3 percent, respectively.

The final August reading of Thompson Reuters/University of Michigan Consumer Sentiment Index dropped to a four-month low of 82.1 from July’s 85.1. Nevertheless, the final reading was an increase from the preliminary August reading of 80.0.

The Dow Jones Industrial Average (DIA) lost 30 points to finish Friday’s trading session at 14,810 for a 0.21 percent decline. The S&P 500 (SPY) fell 0.32 percent to close at 1,632.

The Nasdaq 100 (QQQ) dropped 0.63 percent to finish at 3,073. The Russell 2000 (IWM) sank 1.56 percent to end the day at 1,010.

In other major markets, oil (USO) declined 0.26 percent to close at $38.48.

On London’s ICE Futures Europe Exchange, October futures for Brent crude oil declined $1.14 (0.99 percent) to $114.02/bbl. (BNO).

December gold futures fell $18.90 (1.34 percent) to $1,394.00 per ounce (GLD).

Transports broke an axle on Friday, as the Dow Jones Transportation Average (IYT) fell 1.13 percent.

In Japan, the exchange rate for the yen continues to direct stock prices as Abenomics remains in the spotlight. The Japanese government reported on Friday that the nation’s unemployment rate dropped to 3.8 percent in July – nearly half of our own unemployment rate – from June’s 3.9 percent. Japan’s stock prices faded as the yen strengthened to 98.11 per dollar during Friday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average declined 0.53 percent to 13,388 (EWJ).

In China, concerns about the Syrian situation restrained investor enthusiasm regarding the fact that bond futures trading will resume next week after an 18-year hiatus. The bulls were fed by rumors that the government will expand its free-trade zones beyond Shanghai. The Shanghai Composite Index rose 0.06 percent to 2,098 (FXI). Hong Kong’s Hang Seng Index advanced 0.12 percent to end the session at 21,731 (EWH).

In Europe, concerns about a military strike on Syria overshadowed an upbeat report on economic sentiment, as the major European stock indices finished the week in the red (VGK).

The European Union reported that for the month of August, its Economic Sentiment Indicator climbed 2.7 points in the Eurozone to 95.2 and by 3.1 points in the European Union to 98.1. The indicator rose for the fourth consecutive month in both regions, with the European Union’s reading reaching a two-year high.

Eurostat reported that the unemployment rates for both the Eurozone and the now 28-nation European Union remained unchanged in August at 12.0 percent and 11.1 percent, respectively. Eurostat also reported that the Eurozone inflation rate retreated to 1.3 percent in July from 1.6 percent in June.

The Euro STOXX 50 Index finished Friday’s session with a 1.34 percent drop to 2,721 – falling back below its 50-day moving average of 2,727. Its Relative Strength Index is 40.15 (FEZ).

Technical indicators revealed that the S&P 500 remained stuck below its 50-day moving average of 1,660 after finishing Friday’s session with a 0.32 percent decline to 1,632. At this point, a head-and-shoulders pattern has now formed on the S&P chart, from the period beginning in early May through the present. (There already had been a pinhead-and-shoulders pattern running from the period beginning on July 10 through August 16.) Its Relative Strength Index dropped from 39.11 to 37.37. The MACD is below the zero line as well as the signal line, suggesting a decline.

For Friday, all sectors were in negative territory except for the utilities sector and the consumer staples sector, which gained 0.08 percent and 0.30 percent, respectively.

Consumer Discretionary (XLY): -0.62%

Technology: (XLK): -0.48%

Industrials (XLI): -0.56%

Materials: (XLB): -0.17%

Energy (XLE): -0.04%

Financials: (XLF): -0.46%

Utilities (XLU): +0.08%

Health Care: (XLV): -0.38%

Consumer Staples (XLP): +0.30%

Bottom line: Downbeat economic data and continued uncertainty about the possibility of an American airstrike on Syria sent the major American stock indices into the red for the final trading day of an unusually slow August.

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