Twitter, now down about 14% so far this morning after their earnings report, is just the latest of several high profile companies reporting solid results, only to have their stock prices hammered by investors looking for any reason to sell. Apple experienced the same result last week, as did Microsoft, UPS, and others. In each case there were reasons, justified or not, for investors to react as they did. In some cases, stocks have rebounded as well. However, the message is clear: Investors are skittish. If one looks at the consistency of investor reactions to news from the market leadership, and compares this to historical norms, one can clearly see signs of a market top. What happens after that top is established depends, of course, on many factors. I would point to the 6 1/2 year bull market run, the lofty levels for market indices, and the skyrocketing valuations, both for the market overall, and individual stocks as clear evidence that a significant correction or crash will follow.
The Fed is meeting now, and will release their statement later today, giving us an indication of when rates will begin to rise. The next Fed meeting is not until September, and I expect that meeting to be the most likely time for the first of many rate increases. Investors will be searching the text of the statement, and listening to speeches by FOMC members later this week and next, for indications of their plans for rate hikes. One thing is certain – rate increases are imminant, and it is highly likely that investors, already clearly concerned, based on their reaction to earnings reports, will not react favorably when rates begin to rise.