WALL STREET WEEK AHEAD
DON’T be surprised if Wall Street racks up a seventh consecutive week of losses as the likelihood of more poor economic data and other disconcerting signals outweigh any thoughts that stocks are cheap.
After closing at its highest level in nearly three years on April 29, the S&P 500 has tumbled nearly 7 per cent on the back of a barrage of soft economic data, sparking the debate over whether the economy is headed for a double-dip, or has merely hit a soft patch in its recovery.
The benchmark S&P 500 recorded its sixth straight weekly decline on Friday and volume has picked up, as it typically does, on down days. Another week of selling will mark the longest stretch of weekly losses for the index since 2001.
Red flags, including ugliness in the junk bond market, options activity and the ease with which support levels have been broken, suggest more selling ahead.
“You have to be realistic. You’ve got to have some sort of correction to go into this marketplace just for the healthiness of the market,” said Cliff Draughn, president and chief investment officer at Excelsia Investment Advisors in Georgia.
Investment-grade and high-yield risk premiums in the bond market have also slumped as investors sought safe-haven assets.