I sent out a couple notes Monday to traders that contained a forecast of the week ahead. Today, I want to do a little bit of a stock market recap of this week.
We went into the week hot, expecting bank earnings to open up — and they did. I warned you guys that the market would be a mixed bag and pointed out that Bank of America would get hit hard.
The past couple of quarters, Bank of America sold off big time on earnings, and this time was no different.
Another thing I covered Monday was the U.S Consumer Price Index (CPI) report for June. I warned everyone and their mother that if we come in hot with the CPI numbers — like getting a much higher year-over-year number — we would see some fireworks with yields jumping in the bond market.
And wouldn’t you know it, we sure did have some fireworks. However, there were quite a few things that surpassed my predictions for the stock market this week… and not in a good way.
Stock Market Recap for This Week: What Can Go Wrong, Will Go Wrong
Before I dive into the events I didn’t see coming, I want to discuss bank earnings — starting with Bank of America Corp. (NYSE: BAC) — a little more at length. The company beat expectations by about 34%. And then the stock fell about 2% in the next trading session.
Goldman Sachs Group Inc. (NYSE: GS) beat estimates by 48%, and then the stock also fell, this one about 1%, the next trading session.
Why is that?
If you remember on Monday, I told you the key to profiting off of these stocks during earnings is to gauge how the market rewards big beats and punishes near misses.
Clearly, the pattern here is that the stocks trade lower even after great results. But the most interesting thing to see here will be whether or not this trend continues as more and more earnings come out.
Don’t worry, I’ll have a video next week going over more predictions I have for upcoming earnings!
However, what you should worry about right now is the CPI number that came out on Tuesday… Consumer prices increased 0.9% month over month in June, and the CPI rose 5.4% year over year — which is the biggest monthly gain since August 2008.
I predicted major fireworks in the stock market if the CPI data beat expectations, and it did.
But there’s one prediction I got majorly wrong… and it’s how the stocks would react.
Shocking, I know.
Check out my short video below to get the rest of my stock market recap for this week.
Also be sure to share your thoughts in the comments section below.
And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
