Market Commentary: Equity markets continued to decline last week, with the sell-off accelerating into Friday’s close. The market had been reluctant to establish a bottom during this two-week pullback, but that final wave of selling on Friday seemed to do the trick, as there was not any follow-through on Monday morning. In fact, equity markets have been heading nearly straight up since shortly after Monday’s open. Analysts were quick to suggest that the positive action that began on Monday was nothing more than short-covering prior to Tuesday’s FOMC meeting. However, with that meeting now behind us, and the market advance continuing today, many of those same analysts are now suggesting that it could be more than short-covering.
Government bonds had been moving upward the past couple of weeks on hopes that the Fed might drop some hints of future easing possibilities given the mess that had developed in the subprime arena. Those hopes were apparently dashed when the Fed failed to deliver those hints, and the 10-Year Treasury yield jumped to 4.87% today. The recent sell-off in high-yield bonds created some selective bargains, which has helped stabilize that market for now. However, a high level of uncertainty still permeates this space, and we suspect that additional unwinding is yet to come.
Sectors: The Financial sector has grabbed most of the headlines this past week, and for good reason. Financials are the largest sector of the cap-weighted S&P 500 index and therefore the most influential in determining the course of the S&P. The five-day performance of the Financial Select Sector SPDR Fund was a solid +3.2%. This is even more impressive given the fact that it declined -4.3% on Friday, putting it down -15.2% from its recent peak. The Financial sector remains at the bottom of our relative strength rankings, but it is one of the few sectors that improved its “absolute” momentum score this past week.
The Energy sector also received its share of headlines this week as the price of crude oil declined rapidly after hitting a new high a week ago. As a result, Energy and the Energy Services subsector are posting dismal one-week results, and Energy has relinquished its top spot in our sector rankings to Industrials.
Styles: A few days down and a few days up, but not much has changed in our style rankings. Mega-Caps and Large-Cap Growth continue to be the best performing styles, offering a relative safe-haven throughout this recent market turmoil.
International: International markets have been taking their cue from the USA lately, which has resulted in an overnight time delay in much of the daily action and results. While many international mutual funds are posting negative one-week results, we suspect that this could improve significantly when measured again tomorrow. Meanwhile, China still commands the top position in our global equity rankings.
Sectors: The Financial sector has grabbed most of the headlines this past week, and for good reason. Financials are the largest sector of the cap-weighted S&P 500 index and therefore the most influential in determining the course of the S&P. The five-day performance of the Financial Select Sector SPDR Fund was a solid +3.2%. This is even more impressive given the fact that it declined -4.3% on Friday, putting it down -15.2% from its recent peak. The Financial sector remains at the bottom of our relative strength rankings, but it is one of the few sectors that improved its “absolute” momentum score this past week.
The Energy sector also received its share of headlines this week as the price of crude oil declined rapidly after hitting a new high a week ago. As a result, Energy and the Energy Services subsector are posting dismal one-week results, and Energy has relinquished its top spot in our sector rankings to Industrials.
Styles: A few days down and a few days up, but not much has changed in our style rankings. Mega-Caps and Large-Cap Growth continue to be the best performing styles, offering a relative safe-haven throughout this recent market turmoil.
International: International markets have been taking their cue from the USA lately, which has resulted in an overnight time delay in much of the daily action and results. While many international mutual funds are posting negative one-week results, we suspect that this could improve significantly when measured again tomorrow. Meanwhile, China still commands the top position in our global equity rankings.
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