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Can Amazon save the stock market heading into GDP reports?

In recent weeks, the big stock market rally that started with the US election back in November has been looking increasingly tired. Breath has been weakening with recent NASDAQ gains driven by five big technology companies and the Dow recently rallying on only one stock (Boeing on earnings). 

Earnings season has been spectacular overall, but despite so many companies posting positive surprises, indices haven’t gone up very much and have been unable to hold new highs. This suggests that stocks have already priced in strong growth and some traders have been using the results to take profits and distribute positions as we head toward the seasonally weakest time of the year for stocks which runs from mid-August to mid-October. 

Today may have been the tipping point for markets. The S&P 500 and NASDAQ 100 both broke out to new all-time highs then reversed sharply downward, a sign that bulls may be exhausted and bears taking over. Reversals have abounded in currency markets as well with USD bouncing back and AUD, NZD, CAD, EUR and GBP reversing downward. 

Trading in Facebook and Twitter provide a good example of current market sentiment. Despite a really strong earnings report, Facebook only managed to eke out a 3% gain, while Twitter was slammed for a 14% loss after it reported weaker than expected subscriber numbers. 

It’s now up to Amazon.com, who reports after the close today, to stop the bleeding. A positive report could help to shore up support, but a miss could send its shares and perhaps broader indices off a cliff. Between now and the weekend, GDP reports are due for the US, Canada, France and Spain which could impact market sentiment. For Asia Pacific traders, Japan retail sales and employment figures plus inflation reports for Japan and Australia may attract attention. 

A number of Big Oil companies are still scheduled to report results including Exxon Mobil and Chevron Friday morning which may have an impact on oil and energy stock trading. The price of oil continued to climb Thursday as concerns about rising US production continued to fade as more companies including ConocoPhillips announced cuts to their capital spending plans along with their quarterly results. These cuts reinforce comments from Halliburton earlier in the week about slowing oilfield service demand and have increased confidence that big drawdowns in US inventories are sustainable.    

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