Wall Street is starting to look a little tired as brokers become more concerned about valuations and the growing belief that President Donald Trump will not deliver on tax cuts or on big spending deals in infrastructure.
Eurozone shares fell 0.5% on Friday and the US S&P 500 fell 0.2% after a brief rise on news of Steve Bannon’s exit from the White House.
ASX 200 futures fell 4 points or 0.1% pointing to a flat to soft start for the Australian share market at the open later this morning.
US shares fell 0.6% and Japanese shares fell 1.3%, but Eurozone shares rose 1.2% (after sliding 2.6% the week before).
Chinese shares rose 2.1% and Australian shares rose 0.9% despite Thursday’s sell off driven by the change in Telstra’s dividend policy which saw the bellwether stock lose 10% in value (and rise a mere 0.8% on Friday).
Bond yields were flat to up slightly, commodity prices were mixed with oil and gold down but metals and iron ore up strongly (see separate story) and the $A was up back over 79 US cents as the post-Bannon sacking rally disappeared.
But some analysts are starting to wonder about valuations
For example, last Thursday was the seventh straight day in which the New York Stock Exchange and Nasdaq had more stocks hitting new 52-week lows than highs, the longest stretch since Trump’s election last November.
Reuters pointed out that at Thursday’s close, for a rolling period of one month, 509 more stocks had fallen each day on average than risen, the largest skew to the downside since Trump took office.
And when the market closed at a record high on Aug 7, more stocks ended the day lower than higher.
The S&P 500 is trading at 17.7 times expected earnings – down marginally from March, when it hit a high not seen since 2004 – a level many investors and analysts consider expensive and increasing the risk of a market selloff.
Friday’s choppy training saw the rise in measures that track market volatility, anther sign that investors are becoming jumpy.
So on Friday after that lift from the Bannon firing, the rally quickly ran out of gas.
The S&P 500 closed down 0.2% at 2,425.55, its lowest closing level in six weeks in a choppy day of trading.
Having spent the morning in losses, the index jumped by as much as 0.4% following news of Bannon’s departure.
Investors had hope the firing of the former Breitbart News chief and the chief proponent of “economic nationalism” would temper the more radical elements in the Trump administration.
That optimism hope vanished as the White House formally launched an investigation into Chinese intellectual property theft, a move that could trigger a trade war with China.
So the Dow lost 0.4% at 21,674.51, a two-and-a-half week low. The Nasdaq fell 0.1% to 6,216.527 – its weakest close since July 11. It lost 06% for the week
Both the Dow and the S&P 500 saw a second week of losses, with the Dow suffering its largest two-week percentage decline since mid-September 2016.
The Dow lost 0.8% last week and the S&P 500 0.7%.
In Australia the 0.9% slide in the ASX 200 was despite Friday’s 0.6 slump on Friday to 5747.1 points. The All Ordinaries Index also finished the week 0.9% higher, while dropping 0.5% to 5798.5 points.
Telstra shares ended down 5.9% last week after Thursday’s 10% slump on the back of the change in dividend policy.
Cochlear was the best performing company in the ASX 200, closing 2.9% higher on Friday and 12% for the week after the better than expected results on Thursday.
But Domino’s Pizza, was the worst performer over the five sessions, plunging 13% thanks to disappointing figures and outlook.
Over the week, Commonwealth Bank of Australia – still plagued by those money laundering investigations – lost 1.8%, while the ANZ was up 2.6%, Westpac rose 1.9% and the National Australia Bank gained 2.3%.
