A Long, Weird Week in the Marketplace Comes to a Close

Trading this week was full of ups and downs, both in our domestic markets and overseas. The Chinese markets collapsed on Tuesday. On Wednesday the NYSE stopped trading for over 4 hours because of a software glitch. Markets recovered later in the week, bouncing back from uncertainty to close at week-long highs.

The Dow opened the week on Monday at 17,728.08, fell by over 200 points on Wednesday, and recovered on Friday to close the week up 41.33 points to 17,760.41.
The NASDAQ and S&P 500 indices followed a similar trend, although neither market could match the Dow's gains. The NASDAQ opened the week at 5,024.30 and closed it at 4,997.70, with a big plunge on Wednesday and steady recovery during the later part of the week. The S&P 500 opened at 2,073.94 and closed at 2,076.62 on Friday, for a gain of 2.68 points.

Wednesday's NYSE Software Glitch Reveals Fundamental Weakness

Wednesday morning started with a hiccup and things only got worse from there. The entire trading floor's computer systems crashed at 11:32, and weren't brought back online until shortly before the 4:00 close. On a day that was expected to be relatively quiet, just about everything went wrong.

One thing that the NYSE got right is the separation of Archipelago services from their core connectivity. That allowed trading to stay online at major brokerages, which access the markets through these Archipelago servers. The system is modern and modular, with controls in place to stop problems from spreading.

But there's no doubt that a fundamental weakness of the exchange was exposed, even if the specifics haven't been made public yet. The fact that a single botched software upgrade can close the trading floor is a bad sign. Whichever service or protocol ends up being responsible for the outage will receive special attention by hackers going forward. It's likely that they'll look at proven attack vectors, like the one that took down the exchange floor, when they launch their next cyberattack.

Silicom (SILC) is This Week's Big Loser

Tech manufacturer Silicom (SILC) had to revise its revenue and sales forecasts downward this week. The revisions, which were huge for a company with a market cap of under $200 million, were devastating for the company's share price. Silicom fell by over 6 points on Monday, and the company lost over 40% in real value this week.

Whatever the final quarterly sales end up being for Silicom (SILC), things are probably going to get worse in short order. The company will make an earnings disclosure on the 27th of this month, and analysts are expecting Silicom's stock prices to continue to suffer in its wake. Stock prices are currently at $26.57, near a 52-week low.

Asia Takes A Roller Coaster Ride

If the trading floor of the NYSE hadn't ground to a halt, this week's big story would be the implosion of the Hang Seng. Even with Chinese manipulation to control damages -- which is absolutely taking place -- the market fell by thousands of points this week.  More than that, it took Japan along for the ride and shook markets across the entirety of Asia.

The Hang Seng has always been an index of extremes. It routinely rises and falls by hundreds of points, sometimes with little reason. This week was bad even by Hong Kong's standards, with a dramatic two-day freefall that crippled the marketplace and devalued their currency.

Depomed (DEPO) and its Board Win the Week

The Depomed (DEPO) Board of Directors stood strong against a potential buyout this week, and were rewarded for it with skyrocketing share prices. The hostile takeover, which was launched by Horizon Pharma (HZNP), is now expected to fail. The offer didn't escape the notice of outside investors, who bought up stock and forced share prices to climb nearly 50%. Depomed, which manufactures pharmaceuticals, opened the week at $20.60 and closed at $30.13 per share.
Published on Jul 11, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2016. Content published with author's permission.

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