A fractional change in participation
Stock market volatility increased in recent days despite a relatively quiet week of financial headlines. To compare market movements to an ocean freighter, it doesn’t take much of a cargo load-shift to one side to cause a scene.
We often hear in financial news coverage the daily price movements of an index, such as the S&P 500 or NASDAQ. These days, we’ve also heard quite a lot about the movements of a relatively few tech-stocks. Often overlooked in the headlines is the volume or number of shares that exchanged hands on a particular day. While high or low volume does not necessarily translate to rising or falling prices, it can lead to “shifting cargo.”
As you would expect, not all shares of a company exchange hands on a given day. Apple Inc. (AAPL), for example, now has around 17 billion shares outstanding. In fact, even on high volume days, only a small fraction of a company’s total shares outstanding are actually traded. What does this mean? The vast majority of shares are not traded on a daily basis. A fractional change in the number of participants buying or selling a stock can make a significant tilt. Scaling back from waves to ocean, we still expect the long term performance of a stock investment to be largely driven by the results of the business and the outlook for growth.
Market Comments
The stock market ended the week lower, led by the technology-heavy NASDAQ Index; the NASDAQ decline on Thursday was the largest one-day decline since June
Recent jobs data showed the unemployment rate declined to 8.4%, which was below the estimated rate of 10.2% (source: bls.gov)
Also on the positive side, average hourly earnings increased slightly as well as average workweek hours
COVID-19 vaccine optimism appeared to increase as the CDC prepares a vaccine distribution plan for November; still unknown is whether a vaccine would be available by then
The September 2nd Federal Reserve’s report on economic conditions stated that economic activity increased across most U.S. districts but that gains were modest
Strong vehicle sales and improvements in tourism and retail were positive contributors
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