Posts by Michael Santoli

  • With China quiet, U.S. market must prove it can heal itself

    Michael Santoli at Yahoo Finance 12 hrs ago

    To test a diagnosis, it helps to remove the suspected infectious agent. Something like this is now happening in the markets.

    This is the first of five straight days when Chinese and U.S. stock markets will not be open on the same day. China closed Thursday and Friday for its annual military parade and commemoration of World War II’s end. Then here we head into the three-day Labor Day weekend.

    So for two sessions, American stocks won’t be exposed to the Chinese market that so many consider toxic, and we’ll see if the inconclusive bounce and choppy positioning can tell us anything about whether this has been a brief market gut check or a long-lasting syndrome that threatens the bull market itself.

    The S&P 500 (^GSPC) has regained only about a third of its losses, which is arguably the minimally acceptable rally off such an intense, almost vertical drop.

    Let’s be clear that China has probably received far too much blame for the ugly setback in U.S. stocks. It’s more likely been a confluence of concerns that built into a dam break starting a few weeks ago:


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  • What qualifies as a tech company, anyway?

    Michael Santoli at Yahoo Finance 1 day ago

    The biggest technology-stock fund holds no (AMZN) shares, but does own Western Union Co. (WU), the 164-year-old money-transfer company.

    You’ll find no Netflix Inc. (NFLX) in there. Yet the portfolio features full exposure to the video-game sector, through both Electronic Arts Inc. (EA) and Activision Blizzard Inc. (ATVI).

    Even though this fund – the $11 billion Technology Select SPDR ETF (XLK) – lacks Amazon, it’s got e-commerce peer eBay Inc. (EBAY), not to mention telecom giants that date to the rotary-dial era, AT&T Inc. (T) and Verizon Communications Inc. (VZ).

    Of course, tech investors today do well to look across the industry frontiers for companies doing something new that could upend an industry.

  • A sick market is set to be tested further

    Michael Santoli at Yahoo Finance 2 days ago

    When the patient isn’t improving fast and the doctors are stumped, they order more tests.

    Even after bouncing hard off last week’s lows, the stock market has appeared unwell, with jumpy vital signs and acute sensitivity to new stimuli.

    The Dow Jones Industrial Average fell more than 300 points at the start of trading Tuesday to below 16,200, following following sharp declines overseas. Stocks in Asia and Europe falling more than 2% overnight. 

    The latest setback in global markets following a weak Chinese manufacturing report - with stocks in Asia and Europe losing more than 2% overnight - will surely stir up calls that the S&P 500 (^GSPC) needs to “retest” the recent lows, which sit some 5% below Monday’s closing quote.

    This is all from the standard the standard trading-desk playbook, which holds that true “V” bottoms are rare. Even though we pretty much got a flawless “V” last October, it’s more common to knock around the vicinity of market lows for a while to see if the lower prices attract strong-handed buyers – or not.

    No doubt, there’s plenty more at work in this selloff than the mere tweaking of corporate earnings models.

  • A few key numbers to handicap a scary tape

    Michael Santoli at Yahoo Finance 3 days ago

    When stocks undergo serious stress, market talk turns from stories to stats.

    Just weeks ago the buzz was about Amazon’s (AMZN) work policies and Twitter’s (TWTR) CEO search and Ford’s (F) aluminum-body pickup truck.

    But now the S&P 500 (^GSPC) has rushed to its first double-digit drop in four years with historic speed, and then recovered nearly half the loss almost as fast. The selloff was hard to avoid and the bounce nearly impossible to catch.

    After months when the main U.S. stock indexes barely responded to changes in economic fundamental and global market currents, they are now whipping around far more dramatically than the news flow itself.

    At such times, investors start grasping for numbers to light the dim path ahead. Here are a few to keep in mind as an anxious new week begins:


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  • Market turmoil kicks up opportunity in deeply discounted funds

    Michael Santoli at Yahoo Finance 6 days ago

    Let’s say you’ve watched the quick-and-nasty crunch in stock and corporate bond prices the past couple of weeks and want to treat it as a buying opportunity to gain or rebuild long-term exposure to these investments.

    But the market still acts squirrely, and the S&P 500’s 6% jump from recent lows in two days means the deft traders might’ve collected much of the reflex-rebound cash.

    There is a narrow swath of the market, though, where historically wide markdowns remain available to pretty much anyone.

    Closed-end funds are like mutual funds, except their shares trade on an exchange like a stock. For this reason, their shares often trade at a premium or (more commonly) a discount to the net asset value of the securities they hold.

    Right now, the wave of fear washing through markets has driven wider-than-usual discounts in CEFs holding rather standard portfolios of stocks, corporate bonds and municipal debt. The typical CEF is trading at a double-digit discount, meaning a dollar’s worth of its portfolio can be bought for less than 90 cents.

    But a scan of fund expenses and leverage rules can eliminate those CEFs that are most likely to hurt owners.

  • Three tests face a market shaken by volatility storm

    Michael Santoli at Yahoo Finance 6 days ago

    Doing what it could to humble the greatest number of people, the stock market followed its ominous downside dump Tuesday with the best two-day surge since the dawn of this bull market.

    Among the questions greeting a nervous summer Friday after the S&P 500 jumped 6.4% in two sessions: Do dead cats bounce that high? Another: Are such violent moves a hint of of further pain, or just a passing manic phase?

    With stocks still 7% below their recent highs, it seems there are at least three core challenges facing the market: A badly broken trend, the still-dangerous winds of this volatility storm, and the Fed’s response to all the noise.

    The S&P 500 (^GSPC) chart is busted.

    After months of sideways stasis, stocks have cracked through plenty of trend levels, laying waste to nearly a year’s worth of upward progress in a couple of weeks.

    Long-term investors need not care much about the look of a chart, but it depicts a velocity of wealth destruction and an upending of once-reliable trend lines that reassured buyers.

    The volatility storm has imposed alarming damage.

    The Fed’s fix will be in focus for weeks.


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  • Don't ignore the chance of a 'mild' bear market

    Michael Santoli at Yahoo Finance 7 days ago

    The suddenly violent market has spun investors’ heads around. Ideally this is forcing them to consider a broader range of possible paths ahead for stocks.

    Wednesday’s powerful, if overdue, 4% bounce in the big indexes relieved the immediate pressure. But it’s a reprieve, rather than a pardon, for a tape that has relinquished the benefit of the doubt.

    The S&P 500 (^GSPC) failed even to climb back to the high of the prior day’s badly failed rally. The 619 points the Dow (^DJI) rose yesterday represent less than a third of the ground it lost in the prior week.

    If the main requirement for a decent bottom in stocks was a fearful and confused investing crowd, we’d be pretty close.

    The demand for downside protection in the form of index put options and bets on surging volatility has reached historic levels. The weekly Investors Intelligence poll of investment advisors showed the lowest number of professed bulls in five years. The CNN/Money Fear & Greed Index is deep in Extreme Fear territory.

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  • Unhinged market tests Wall Street rules of thumb

    Michael Santoli at Yahoo Finance 9 days ago

    We’re moving from an indiscriminate selloff to a discriminating bounce.

    After three days of sweeping carnage in global stock markets, overnight Chinese stocks (000001.SS) suffered more injury and Japan (^N225) fell further. But Europe and US stocks were poised to stage at least reflex rallies.

    This was even before the widely anticipated easing move from the People’s Bank of Chinawas announced before 7 am New York time. The fact that Western markets were set to de-link from China’s manic market is a positive, if only a tentative one.

    With the immediate prospect of an ongoing crash set aside at least for the moment, an investor’s greatest risk is perhaps being hit by an errantly thrown cliché.

    In volatility attacks, supposed rules for surviving and profiting from are thrown around both by real and would-be market gurus.

    The S&P 500 fell more than 2% a day for three straight sessions, a rarity outside the crucible of bear-market climaxes.

    “Markets never bottom in August.”

  • It's now a bull with claws, as traders await a washout

    Michael Santoli at Yahoo Finance 10 days ago

    The market owes us nothing – not even an explanation.

    After rising for six-and-a-half years and reaching a generous valuation in a slow-growth world, big U.S. stocks had gone a long way toward pricing in a healthier corporate economy.

    Perhaps the idea that the market owes us no more, that bullish investors were playing only for an “upside overshoot” beyond fair value, set the context for this nasty selloff of the past week. But that’s not very enlightening or helpful right now, as markets look to extend a sloppy selloff into a new week.

    Yes, China’s currency devaluation and the disorderly descent of its stock market are the proximate culprits here. But emerging-market assets have been in a smothering decline, commodities were being liquidated and credit markets have been unsettled for months.

    Now the broad market is making up for a monotonous plot by packing lots of drama into a brief period. Our market has gone from shrugging off global turmoil to throwing up hands in surrender to them.

    So here are a few things to consider as red fills quote screens this morning:

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  • 'Normal' stock drop breaks an uncommon market calm

    Michael Santoli at Yahoo Finance 13 days ago

    This stock market slide is like a 60-degree August day in San Diego: A rude shock for those used to the steady local norm, but otherwise pretty mild to anyone who’s at all worldly.

    The smothering pressure of asset declines across the developing world has finally forced the S&P 500 (^GSPC) out of the tight box that’s contained the index for the past half year.

    Thursday’s relentless but not-quite-panicky 2.1% loss placed the benchmark a few points beneath its March low. Traders relying on this slender trading range holding up now need a new game plan.

    Yet one reason it feels a bit jarring is because the US equity market has been unusually flat for months, lulling us with sideways choppy moves.

    The S&P is now at a six-month low, yet is only down 4.5% in that span. That is the smallest decline out of the 623 six-month lows registered by the index since the year 1928. For what it’s worth, the one-year forward returns from a six-month low in the index have been better than the average yearly performance over the long stretch of history, according to Yahoo FInance contributor Ryan Detrick.