The week can be summarized succinctly as four normal days followed by a bummer of a Friday, which took back all of the week's gains and then some when it became obvious to anyone and everyone that China might not be the raging dynamo of capitalism once thought.
With a drop on the Dow of nearly 300 points, Friday's whiplash took the DJIA back to break-even for the year and ended the week with the Industrials off 231.35 (1.28%). The remainder of the week was mostly mundane, with the average down Monday, up Tuesday and finally into positive territory on Wednesday. Thursday was flat.
Following a pattern similar to that of the Dow, the S&P 500 also lost steam, down 20.88 (0.99) for the week, a loss not nearly as dramatic as the Blue Chips. However, the S&P ended up less than one percent on the year, a condition which central planners and fund managers are finding unpleasant and unprofitable.
Nearly four full months into the new year, investors are still searching for a catalyst beyond the usual dramatics from the Federal Reserve to move markets higher. Considering the poor performance out of China and the rest of the EM, the catastrophic condition that is the European Union, and the general negative tone of US macro data, in deference to the usual "recovery" noise, a very good argument for profit-taking has appeared.
The NASDAQ suffered a similar fate, gapping lower on Friday to post a massive 76-point decline for the day. On the week, the NASDAQ was lower by 64.25 points (1.28%), equaling the DJIA as the worst percentage performer.
Beyond the aforementioned wall of worries, what has markets particularly off-balance are comments from a variety of Federal Reserve officials, some which are for a rate increase ASAP, while others seem to have reversed course and favor the wait-and-see approach, which is wearing thin on all fronts. Clarity does not serve the Federal Reserve well at this juncture - indeed, maybe not at any time - as market reaction is exceedingly swift to judge.
The constant din of jawboning from current and former Fed officials has provided market participants with a kind of backstop mechanism, one which has successfully prevented an outright bubble in stocks (a debatable point) and, at the same time, limiting any downside action to less-than-correction levels.
As stocks have not seen a significant retreat since the summer of 2011 - and even that was mild and short-lived - the argument for a correction of ten percent or more has its followers, though bearish thoughts have been effectively eviscerated by the Fed and its hyperactive role in the market.
With a June rate increase now seen as nearly off the table, the view is that September will be the most opportune time for the Fed to act to raise the federal fund rate off the zero bound, though many voices are already saying that 2016 or beyond will be the date at which the "renormalization" process takes flight.
With central banks and, especially, the Fed, so deeply ingrained in equity and bond markets, it has become difficult, if not entirely impossible, to accurately predict future market movements.
Perhaps this is a condition with which markets should be desirous. Complacency and indecision might turn out to be the best weapons against deflation and outright recession. Lessons learned from past experience are no longer helpful as the global economy has never been so utterly and consistently commanded, contrived and controlled. Eventually, one would suspect a shakeout. As usual, getting the timing right is a paramount consideration, though the recent activities of markets and central banks has left all participants scratching for solutions.