A Weak Week in Equities

Stocks faltered this week, as the S&P 500 slumped about 1.6% (through midday Friday). The weak week was a far cry from where stocks stood seven days ago, when the S&P 500 enjoyed a 2.4% surge.

After vaulting to new highs last Friday, I was expecting stocks to give back and consolidate. What I wasn’t expecting was the rather tepid earnings we’ve seen from many big companies such as IBM (IBM), United Technologies (UTX) and Verizon (VZ).

Of course, earnings on the whole have been decent. Although not yet technically over, the majority of really important earnings have come in, and here we see that of the 171 S&P 500 companies that have reported, 77% are beating earnings per share (EPS) estimates. Those EPS beats are, on average, about 5%. On the revenue side, only about half of the companies have beaten estimates, while about half have fallen short.

Interestingly, the market has been held up largely by a few big tech stocks making new all-time highs. Stocks such as Google (GOOGL), Amazon.com (AMZN), Facebook (FB) and Netflix (NFLX) are carrying the indices of late.

At this point, I think earnings are largely a known quantity, and now traders are focusing on pending uncertainties such as the Fed’s next move. Will there be a rate hike in September? The Fed Funds Futures are not pricing one in, but many on Wall Street are expecting a hike.

And what about the recent tumble in gold, oil and emerging markets?

What will the fallout be of these events on U.S. markets?

The bevy of unknowns here is one reason why we are holding cash positions at the highest levels of the year in our newsletter portfolios.

The way we see it, there is no rush to get into equities here. The markets are replete with uncertainty right now, and the path of least resistance appears like it’s lower from here.

If you have money on the sidelines right now, then that’s not a bad place to keep it, in my opinion. Of course, that doesn’t mean there aren’t opportunities out there to put money to work.

For more on what we like right now, including how our subscribers are taking advantage of those opportunities, check out my Successful ETF Investing newsletter today!