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Amazon Shares Slide and Taper Test

Daily Insights: Expert Opinion - Doo Prime News

US Stocks fell on Friday, 30 July 2021, on the back of a selloff in Amazon shares. Amazon shares dropped 7.6% after the company’s revenue and sales outlook missed expectations. Markets whipsawed last week on a combination of factors.

Earnings from Big Tech, such as Amazon, Apple, Microsoft, and Tesla, coupled with China market selloff, US GDP, and stimulus talks contributed to the volatility, Fed said.

Fed Chairman, Jerome Powell, said Federal Reserve officials are moving closer to when they can start reducing support for the US economy, but added that there is “still some way to go”.

Markets shrugged off selling earlier in the week and posted nice gains on Wednesday, 28 July, and Thursday, 29 July 2021. This shows the eagerness in buying the dips.

Unfortunately, the Amazon news proved too much and the market gapped down on the open on Friday and just could not close the gap.
However, the market posted a comeback and closed well off the lows.

Here are the closing levels on Friday:-

 Last               Change        %Change 
Dow Jones   34,935,47 -149.06 -0.42% 
S&P 500  4395.26 -23.89 -0.54% 
Nasdaq Comp 14672.68 -105.59 -0.71% 
US 10Y 1.226   
VIX 18.24 0.54 3.05% 

The US jobs market has some ways to go to meet the Fed Taper Test, Governor Lael Brainard said on Friday.

Brainard also suggested that the recent surge in inflation is likely to prove temporary and that she saw upside and downside risks to the economy, the latter attributed to the Delta variant of COVID-19.

In terms of tapering asset purchase, Federal Reserve Bank of St Louis CEO James Bullard says, “My preference would be to get to a decision in September and start sometime after that.”

We are expecting more data from IHS Markit US Manufacturing PMI, factory orders, ADP National Employment Report, and non-farm payrolls to come.

With Fed officials citing jobs growth in their speeches, the market will be reacting to any readings outside of expectation.

Economists polled by Reuters forecast the economy added 926,000 jobs in July after June’s forecast-beating 850,000 in June. 

August is when most Americans take their summer holidays. This could affect liquidity and could exaggerate moves. With the Chicago Board Options Exchange’s (CBOE’s) Volatility Index at 18.24, you want to be prepared for volatility.

Source: CBOE, Reuters, Bloomberg

This commentary was written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large US bank for more than 20 years.

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