Stock performance this week looks very similar to last week, with small losses pushing the broader indexes lower. An August consolidation was anticipated and it can continue for a few weeks yet, perhaps all the way to Labor Day weekend and the unofficial end of summer. By then, traders should be buzzing in anticipation of the Federal Reserves next move, to taper or not to taper, while political debates over the Affordable Care Act and the debt ceiling will bring back at least an echo of the "fiscal cliff" battle.
This week saw technology move in two different directions. Moving higher was Apple (NASDAQ:AAPL), following a "tweet" from Carl Ichan about his meeting with Apple CEO Tim Cook. Ichan said he discussed increased stock repurchases with him, and the result was a surge in Apple's stock price. Coming into the week Apple was about $460 per share and it closed Wednesday a shade under $500. The pop in Apple shares helped power the Nasdaq higher and kept it from slipping along with the other major indexes.
In contrast to Apple, Cisco (NASDAQ:CSCO) reported earnings Wednesday night that disappointed. The firm will lay off 4000 workers, about 5 percent of its workforce and said it aims for higher growth rates. The cutting of staff isn't positive though, as it will not lead to higher growth rates beyond the short-term boost to earnings. Investors seem to agree with the negative outlook, sending CSCO shares down 10 percent in after hours trading. Since Apple has a far greater weight than CSCO in tech indexes, the overall impact from these two companies is positive for tech this week.
Aside from technology, we saw further weakness from housing and real estate. The homebuilders weakened again and the sector is now dangerously close to breaking down. It is literally make or break time for the sector. Also weak were real estate and utilities, two interest rate sensitive sectors. The long dated Treasury bond also sank to a new low as interest rates push back to their late July peak.
The charts of homebuilders and interest rates are reaching opposite points: homebuilders on the verge of breaking down and interest rates on the verge of breaking out to new highs. Given the general weakness of the overall market during this consolidation phase, investors should be prepared for losses in sectors such as home building and real estate, and those losses could weigh down the broader market.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.