Summer Selloff Continues

The Dow was down today for the sixth day and counting as the summer selloff continued. Stocks like Apple (AAPL) and Disney (DIS) have driven down the major indices. The Dow closed down today, losing 46.37 points to close at 17,373.38. The NASDAQ dropped 12.90 points to 5,043.54. The S&P 500 followed suit, and closed out the trading day down 5.99 points to 2,077.57.

Summer Selloff Heats Up

There’s a saying, “Sell in May and walk away,” which analysts repeat every late spring.
This year, it looks like it applies. Big market movers have had a tough summer, and things don't look like they’ll be improving anytime soon. We mentioned Apple (AAPL) and Disney (DIS) earlier, but Tesla (TSLA) is also down 10% on the week, and Starbucks (SBUX) might be next.

So far this summer the Dow is down 4.50%, or right around 800 points. The underlying weaknesses in some formerly high-flying stocks is being laid bare. Twitter (TWTR) is another excellent example. The stock is only 1 point off of its IPO price, near an all-time low.

Not all of the news is bad, though. Netflix (NFLX) is on fire independent of the market. Amazon (AMZN) is also up despite some massive downward pressure in the sector. More importantly, consumer spending is increasing even though the job market is essentially flat.

Jobs Report Released Today

Government reports today indicated that 230,000 jobs were created last month, keeping the unemployment rate flat at 5.3%. Although this was hardly a breakout month for jobs, with the markets down as they have been, and layoffs happening in the energy sector among other places, a flat report was to be expected.

The effect that this jobs report will have on consumer spending is yet to be seen, but I am predicting sustained growth. The reason being that gas prices are still depressed beyond anyone’s predictions. I had said that this would be a cheap summer for fuel, but even I didn’t see $44 crude oil coming.

When consumer costs fall, that frees up money for them to spend elsewhere. This isn’t groundbreaking news. But it’s not just straight supply and demand, inflation rates are falling too. Deflation stretches every consumer dollar that much further, and makes it much more likely that consumer spending will continue to rise regardless of the jobs situation.
Published on Aug 7, 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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