And so the story goes… The stock market thrived for five years and finished at record heights in 2013, just to begin a familiar trend back down immediately following its bull market peak. Or at least that is what is running through the minds of investors as we come back from one of the worst trading weeks in over a year.
Many of the industry’s most influential characters have been expecting a correction to come this year, including some of the economists and experts featured in RMI’s recent publications. So far January’s stock market numbers have shown that the proof is in the pudding. We mean that quite literally, as Kraft Foods, which owns the popular pudding brand Jello, has seen a near 2% drop in share prices so far this year.
However Kraft is among some of the more resilient big name stocks this year, as companies like Xerox, Yahoo and Best Buy are having a nightmare start to the New Year, each seeing double digit percentage drops in share prices.
Today’s market fluctuations proved to be a small example of the unsteadiness of the 2014 market, as stocks opened with some positive momentum just to take a hard plunge back down mid-day following more poor earnings reports. Stocks managed a slow crawl back but still ended up in the red at the closing bell.
Today was especially tough on tech stocks, including the leading social media companies like Twitter, Facebook and LinkedIn, which all saw significant losses during trading hours. Investors will continue to bite their nails all week long, as Wall Street awaits a bundle of reports during the week that will likely have an impact on market trading. At the forefront of the anticipated news for this week is from the Federal Reserve, which is set to speak on Wednesday and will be bringing news concerning the future of Quantitative Easing, the Federal stimulus program that is suspected to have been fueling this 5 year bull market.
The Fed is widely expected to announce further cuts to the stimulus program, which was originally pumping $85 billion a month into Wall Street before being dropped to $75 billion this month. Wall Street is finding it tough to view the glass half full when it comes to Quantitative Easing. On one hand, the Fed can announce further cuts to the program, which means investors will face a market that is $10 less supported by stimulus. On the other hand, the Fed decides not to cut back, which leads investors to believe the economy is still struggling and the market may be primed for a correction.