Big investors pause amid tough August
NEW YORK — Wall Street’s big investors are in wait-and-see mode.
There’s been plenty to give them pause this week: The stock market is down and oil is surging as the Syrian civil war escalates. Then there’s the lingering worry that the Federal Reserve will end its stimulus too soon.
The next few weeks promise more big headlines. The government releases its August jobs report and Washington ramps up for a debate on the debt ceiling. Syria is just the latest ingredient in an already volatile mix.
The Dow Jones industrial average edged up 48.38 points, or 0.3 percent, to close at 14,824.51 on Wednesday. The Standard & Poor’s 500 index gained 4.48 points, or 0.3 percent, to 1,634.96. The Nasdaq composite rose 14.83 points, or 0.4 percent, to 3,593.35.
While the selling in stocks appears to have abated for the moment, the trend for the market has been down. The S&P 500 has lost 4.4 percent since reaching an all-time high on Aug. 2, while the Dow is down 5.3 percent.
With all that uncertainty, there are signs Wall Street’s more active players — hedge, pension and mutual funds — are heading to the sidelines.
Last week, investors pulled $10.3 billion out of the S&P 500 SPDR, an exchange-traded fund that is one of the most widely held investments on Wall Street, according to fund tracker Lipper. In the same week, institutional and retail investors socked away a combined $10.7 billion in money market funds, the traditional storehouse for cash when investors aren’t willing to risk it elsewhere.
Nearly 6 percent of large institutional investors’ portfolios are sitting in cash, the highest since 2009, according to research from Citigroup.
Gold has also seen a rebound in interest. Last week, the most widely held gold exchange-traded fund, the SPDR Gold Trust, saw investor inflows for the first time since February.
Growing geopolitical risk like in Syria is almost always damaging to investor confidence. Investors worry that a U.S.-led attack against Syria could draw the country into Syria’s civil war, or worse, fan a larger conflict in the region.
Syria — and the risk of Middle East conflict — has also raised concern for the economy: higher oil prices. Crude oil is up nearly 5 percent this month, most of it coming in the last few days. Oil rose $1.09 to $110.10 a barrel on Wednesday. Costlier oil almost always translates into higher fuel expenses for businesses and consumers, weighing on consumer spending and the economy.
“When you add it all up — the problems in Libya, Egypt, Syria — you’re looking at three million barrels a day in potential production outages,” said Nick Koutsoftas, a commodities-focused portfolio manager at Cohen & Steers.