The middle of August to the middle of October is historically the weakest time of the year for stocks and this year’s seasonal slide appears to be arriving right on schedule.
The bottom fell out from under US stocks on the last day of earnings season with the Dow falling 1.2% and the NASDAQ falling 1.9%. NetApp fell 6.7% following its earnings report while Cisco fell 4.0% and Wal-Mart declined 1.6%. The terrorist attack in Barcelona didn’t help sentiment either and accelerated losses in the afternoon, particularly in airline stocks.
With earnings season all over except for Canadian banks which start reporting next week, traders’ focus has turned back toward the ongoing turmoil in Washington and the potential domestic political problems that could flare up in the coming weeks including the debt ceiling, budget battle, infrastructure spending, tax reform, and health care reform all of which could end up in a government shutdown.
Defensive havens like gold and the Yen continued to attract capital coming out of risk markets and with crude oil bouncing back Thursday, resource stocks softened the blow for the TSX which fell only 0.3%. Oil could remain active through Friday’s weekly rig count with speculation surrounding US production growth still driving energy pricing. With limited other news through the end of the week, politics and commodity price action could have a significant impact on today’s trading.
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