MARKET SNAPSHOT: Stock Market Bracing For Potentially The Most Explosive Stretch Of Trading This Year
June 03 2017 - 8:16AM
Dow Jones News
By Sue Chang and Mark DeCambre, MarketWatch
June is among the weakest months for stocks
The stock market could face its most turbulent week of trading
so far this year, with a trio of potentially destabilizing events
on deck: former FBI director James Comey's testimony, the U.K.
election, and the ECB monetary-policy meeting. The trifecta, coming
nearly all simultaneously on June 8, threaten to derail U.S.
equities' record-setting run.
"The hurricane season is forecast to start earlier than normal
this year for the Trump administration as a perfect storm of events
is converging," said Chris Zaccarelli, chief investment officer at
Cornerstone Financial Partners.
Comey, who was fired by President Trump early last month, on
Thursday will testify before the Senate Intelligence Committee
(http://www.marketwatch.com/story/when-will-james-comey-testify-2017-06-01)
on Russia's role in the U.S. presidential election as well as
whether he was pressured to drop a probe on possible collusion
between Trump's campaign and Russian officials.
"The Comey testimony appears to be the second act in the latest
drama on Capitol Hill and we think this installment only makes the
road that much longer to meaningful tax reform and fiscal
stimulus," Charlie Ripley, investment strategist at Allianz
Investment Management, told MarketWatch.
Stocks have set numerous records over the past months on
expectations that Trump will usher in a more business-friendly era
through tax cuts and ramped-up fiscal spending.
Aside from Comey's Senate appearance, former Federal Bureau of
Investigation director Robert Mueller is overseeing a federal
investigation into Russian interference in the 2016 presidential
election that could possibly lead to criminal indictments against
those in Trump's inner circle
(http://www.marketwatch.com/story/why-the-white-house-should-worry-special-counsels-usually-result-in-criminal-charges-2017-05-18).
Across the Atlantic, the British will head to the polls in a
snap election to pick their representatives to the House of
Commons. Prime Minister Theresa May's Conservative Party currently
has a 17-seat working majority but as support for the Conservatives
wanes
(http://www.marketwatch.com/story/when-is-the-uk-election-and-when-do-we-know-who-won-2017-06-01),
the outcome of the election could reshape the U.K. Parliament and
lead to greater uncertainty as the country negotiates its way out
of the European Union.
On the same day in Tallinn, Estonia, the European Central Bank
could set off tremors of its own if it unexpectedly announces a
policy shift
(http://www.marketwatch.com/story/ecb-urged-by-germans-to-prepare-to-unwind-qe-2017-06-01)
to wean Europe from its massive stimulus program at its monetary
policy meeting.
Economists at Deutsche Bank believe that while the ECB is not
yet ready to announce an exit from its quantitative easing regime
next week, it could telegraph that a tapering is imminent in a bid
to prepare the markets.
Even without the political cliffhangers, the market is entering
a rough patch as summer doldrums set in.
Stocks have recorded a median decline of 0.79% in the two-week
period between May 30 and June 13 over the past 10 years, according
to data from Bespoke Investment Group.
Since 1950, June is among the worst months for stocks with only
August and September having worse average returns as the chart from
Ryan Detrick, senior market strategist for LPL Financial,
shows.
Nonetheless, there are reasons for investors to take heart.
"June historically has been a weak month for equities, but the
catch is some of the worst drops have taken place when the S&P
500 index was beneath its 200-day moving average to start the
month. When the S&P 500 has been in a bullish trend--above this
long-term trendline--June has been higher 59% of the time versus
33% when starting below," Detrick wrote in a recent note.
Stocks kicked off this month firmly above the 200-day moving
average, suggesting that any pickup in volatility could be a buying
opportunity, he added.
Indeed, the market has been extremely resilient with even poor
economic data failing to dampen investors' appetite for stocks.
The U.S. added 138,000 new jobs
(http://www.marketwatch.com/story/us-adds-138000-jobs-in-may-unemployment-drops-to-16-year-low-of-43-2017-06-02)
last month, below the 185,000 increase projected by economists in a
MarketWatch survey, while the unemployment rate fell to 4.3%, the
lowest level since 2001, the Labor Department said Friday.
The tepid number, however, sparked speculation that the Federal
Reserve may stop after just one more interest rate hike this year
rather than the two widely expected. The Fed could increase rates
as early as middle of this month when the Federal Open Market
Committee convenes.
All major indexes closed at records for a second session in a
row on Friday with the S&P 500 rising 1% for the week while the
Dow Jones Industrial Average added 0.6% and the Nasdaq rallied
1.5%.
(END) Dow Jones Newswires
June 03, 2017 08:01 ET (12:01 GMT)
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