The historic swings in the US stock market over the past two weeks have investors struggling to figure out where equities may be headed next. Only one thing seems clear: The volatility is far from over.
However, with the S&P 500 down 17.6 percent from its high this year, many investors say a bottom could be near and bargain hunters could trigger at least a momentary bout of buying.
“We’re not even close to the end of volatility, but given a decline of almost 17 percent in 13 days, we could see a rise from these levels,” said Mike Gibbs, chief market strategist at Morgan Keegan in Memphis, Tennessee.
The situation in Europe has been dictating much of the market’s recent movement. On Tuesday, shares fell after a meeting between the heads of France and Germany failed to squelch fears about eurozone leaders’ ability to contain the region’s debt issues.
The S&P 500 fell 4.7 percent this week, extending losses of 12.4 percent over the previous three weeks, its worst streak in 2.5 years.
In a note, Birinyi Associates wrote that while the market remained difficult in the short term, there were indications that stocks were attractively valued.
Birinyi pointed out that the 2.25 percent dividend yield on the S&P 500 was higher than the 10-year US Treasury note’s yield, making this “only the second period since the 1950s where stocks have yielded more than bonds.”
Next week, investors will have plenty of US economic indicators to watch, including the release of data on new home sales data, durable goods orders, consumer sentiment and gross domestic product. Should the data follow the recent trend of weak reports, it could cause further selling.
While US growth concerns remain a primary focus for investors, the issues in Europe are seen as the primary driver of the US stock market in the near-term.