The stock market saw a pull-back yesterday…which was not a big surprise given how much it had rallied over the previous five week…and how much it had shot-up on Wednesday. In other words, the market was getting extended on both a short-term and intermediate-term basis…and thus had become ripe for a pull-back (or at least a “breather”). The decline came on high volume and poor breadth, but neither of these readings were any more extreme than they were in the other direction during Wednesday’s rally. Therefore, we shouldn’t be overly concerned by the (expected) drop we experienced yesterday.
That said, the futures are trading considerably lower this morning, so if there is some significant downside follow-through as we move into early May, it will raise some concerns rather quickly. (BTW, the few overseas markets which are open are down by quite a bit as well. However, many/most of them are closed for the May Day holiday.)
The blame for much of this morning’s decline in the futures is focused on the earnings reports from last night…with particular emphasis on Amazon (AMZN) and Apple (AAPL). Given that AMZN is down more than 5% in pre-market trading and AAPL is down almost 3% as we write, this blame seems to be pointed in the correct direction. However, we also wonder if some of the data out of South Korea is having an impact as well.
As we have highlighted many times in the past, South Korea’s economy is an export-based one and thus their economy and their stock market are usually good indicators to keep an eye on. Their stock market was closed last night, but they did release their export data on the Thursday the 30th and it was quite poor. It fell 24.3% in April…which was its biggest decline since ...