US stock markets closed lower on Friday with all major indices posting weekly losses. There are several potential causes of this. 

It was a week shortened by holidays, with Labour Day on Monday, and I suspect some traders also took a few days off for the Rosh Hashanah (Jewish new year) holidays. 

The decline was the biggest weekly fall since mid-June. The Dow booked back-to-back weekly declines. 

You can blame the rise on the Delta variant Covid cases, which could lead to a slowdown in economic recovery. 

Or, perhaps it was the Apple federal injunction that said the company cannot force developers to use its payment systems. Apple was the biggest decliner in the Dow industrial average down 3.31%. 

It could also have been that producer prices recorded a fresh series high. PPI was up 0.7% from the prior month and 8.3% from a year ago. Excluding food and energy, core PPI was up 0.6% on month and 6.7% on year. 

Here are the closing levels on Friday: – 

I am going to ask again: Is this just another pullback for dip buyers to take advantage of, or are we looking at further declines? 

We have seen virus numbers grow before and markets have shrugged them. We have also seen some negative news on individual tech names before, and markets have also ignored that. 

Fed might be tapering earlier than expected, but it did not stop the markets from making new highs before. 

Investment banks issuing negative calls on US stock markets also have been heard before. The latest cites Goldman Sachs, Morgan Stanley, and Citi Group calling for caution albeit no one is expecting a sharp selloff. 

So, what is different now? 

It has been known for stock markets, or any market, to experience fatigue. Basically, the market is just getting tired and wants to take a breath. 

September is seasonally the weakest month for markets and although the past does not mean the future, it is something to consider. 

What would it take for bulls to book their profits? We know bears have been calling for a retracement for a long time and getting frustrated. Will they prevail this time? 

What about the retail army? Are they ready to give up? They trade more on fear and greed than any other sector. 

Plus, it’s set to be an interesting week ahead with the Consumer Price Index (CPI) on Tuesday 14 September 2021, Retail sales on Thursday 16 September 2021, and consumer sentiment on Friday.  

Buckle up – it could get bumpy. 

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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