2 Reasons Stocks Stumbled Last Week

While there weren't any clear catalysts for last week's stumble, here are two reasons that could help to explain the fall.

Apr 12, 2014 at 3:00PM


Over the past three days, the S&P 500 (SNPINDEX:^GSPC) tumbled more than 3%, leaving analysts and commentators wondering whether this is the beginning of a bull market.

At first, there seemed to be few catalysts to spark the decline. On Tuesday, Alcoa (NYSE:AA) released earnings for the three months ended March 31. Although the aluminum giant's fortunes have waned in recent years, it's still often considered an informal bellwether for the broader economy, as it was formerly the first company on the Dow Jones Industrial Average to report results each quarter.

With this in mind, it would seem as if things are headed in the right direction, as the company announced better-than-expected net income, albeit on lower revenue. "Transformation is accelerating," said CEO Klaus Klienfeld. "We're powering growth in our value-add business and aggressively reshaping our commodity business."

Adding to the good news was an upbeat jobs report on Thursday. According to the Labor Department, initial claims for unemployment benefits dropped 32,000 to a seasonally adjusted level of 300,000 in the week ended April 5. It was the lowest reading in nearly seven years.

The good news left analysts scrambling to explain Thursday's tumble, in which the major stock indexes dropped 2%. The most common explanation seems to be that investors have finally decided that the market's multi-year rally has gone too far.

"Clearly investors are nervous about high-flying momentum stocks," an investment strategist told CNBC. "There is a rethink on whether better earnings and economic data will support a resumption of the momentum that was driving biotechnology and higher-flying technology stocks earlier in the year."

Further fueling a decline on Friday was JPMorgan Chase's (NYSE:JPM) disappointing earnings report. Net income at the nation's largest bank by assets fell by 18.5% on a year-over-year basis because of elevated legal expenses and disappointing revenue from trading and mortgage operations.

By contrast, Wells Fargo (NYSE:WFC), the fourth largest lender by assets, announced yet another quarter of record earnings per share. It was the 17th consecutive quarter of EPS growth at the California-based bank, and news of the performance sent its stock up by 1.5% in afternoon trading yesterday.

When all was said and done, in turn, last week's drop appears to have been much more psychologically driven than anything else, as whatever bad news made its way into the market was coupled with evidence for optimism.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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