Money Morning Article of the Week
by Michael E. Lewitt
In South Florida, we call the dog days of summer the “mean season“, as vicious thunderstorms move over the Everglades every afternoon and attack the east coast with lightning strikes and blinding downpours. We keep our fingers crossed that the storms won't morph hurricanes that can sweep the ocean over the land and cause catastrophic destruction.
After a period of intense hurricane activity in the early 2000s, it's been ten years since we've been hit by any serious storms, and we are being told that strong El Nino conditions will likely protect us again this season. But we know that sooner or later our luck will run out, and we will be back in the eye of dangerous winds and storm surges. And, at least for a moment, we'll wish we lived somewhere other than in paradise.
Stock market investors are experiencing similar feelings after a six year hiatus from reality, courtesy of the federal reserve. Paradise is starting to give way to a very mean season…
The Dow Jones Industrial Average experienced its longest losing streak in four years, falling for seven trading days in a row. The Dow lost 1.79% on the week to close at 17373.38 and has lost 1,000 points since its May 19 high of 18,312.39. The Dow is now down 2.52% on the year. Other indices are holding up better. The S&P 500 lost 1.25% to close at 2077.57 and is now up 0.91% on the year while the Nasdaq Composite Index lost 1.65% to close at 5,043.34 and is up 6.49% year-to-date.
Effervescent Stocks are Losing Air
Two of the stocks that have powered the markets higher started to lose significant altitude for the first time, last week. Apple, Inc. (Nasdaq: AAPL) continued its recent slide to shed another 4.8% to end the week at $115.52, down 12.8% from its May 22 level of $132.54.
The Walt Disney Company (NYSE: DIS) lost 8.9% on the week after reporting that its ESPN unit lost subscribers. This started a sell-off in other media stocks including Time Warner (NYSE: TWX), Viacom (Nasdaq: VIA), and Discovery Communications, Inc. (Nasdaq: DISCA). Media stocks have been hedge fund darlings and added to the pain of those perpetual underperformers, who had already been struggling to produce returns for their investors.
