Market Commentary: Traders were hoping for another weak employment report last Friday with the hopes that it would entice the Fed to lower interest rates again. Instead, a much stronger than expected report was delivered. In addition, the weak August employment report was revised significantly upward. Based on prevailing expectations, we would have thought that stocks would decline. Instead, stocks rallied strongly on the news, and the strength has carried into this week as well. It seems the market is now in a “good news is good news” phase. It is earnings season once again, and expectations are running low. We will soon see if those lowered expectations are factored into current prices.
The 10-year Treasury yield jumped with the release of the employment report and is currently at 4.65%. The high-yield market continues to show improvement. Most major money market funds are yielding in excess of 5%, which is better than all points on the Treasury yield-curve.
Sectors: The Materials sector has been holding the top spot for a few weeks. Alcoa (AA) led off earnings season after the close yesterday and shares were down hard at the open today. However, coupled with the earnings miss was a statement from the company that it would increase its share buyback program. As a result, shares of Alcoa have stabilized somewhat. We expect this type of volatility to be the norm for this sector throughout earnings season. Chevron (CVX) issued a profit warning and was down nearly 2% at today’s open, taking much of the Energy sector with it. However, the Energy sector staged a strong turnaround on rising oil prices and finished the day as the top performing sector.
Styles: Various “Growth” styles now occupy the top three spots in our style rankings while those with “Value” in their name are near the bottom. There was an across-the-board improvement in momentum this week as nearly all equities benefited from the surprising strength of the September employment report.
International: We mentioned a week ago that China has probably reached the unsustainable parabolic phase of its advance. As if on cue, China underwent a sharp two-day pullback. However, it essentially recovered that decline and ended the week little changed from where it started. A cooling off period would be welcome by most long-term investors at this stage. Emerging Markets continue to exhibit superior relative strength versus the world’s three largest capitalized markets: USA, UK, and Japan.
The 10-year Treasury yield jumped with the release of the employment report and is currently at 4.65%. The high-yield market continues to show improvement. Most major money market funds are yielding in excess of 5%, which is better than all points on the Treasury yield-curve.
Sectors: The Materials sector has been holding the top spot for a few weeks. Alcoa (AA) led off earnings season after the close yesterday and shares were down hard at the open today. However, coupled with the earnings miss was a statement from the company that it would increase its share buyback program. As a result, shares of Alcoa have stabilized somewhat. We expect this type of volatility to be the norm for this sector throughout earnings season. Chevron (CVX) issued a profit warning and was down nearly 2% at today’s open, taking much of the Energy sector with it. However, the Energy sector staged a strong turnaround on rising oil prices and finished the day as the top performing sector.
Styles: Various “Growth” styles now occupy the top three spots in our style rankings while those with “Value” in their name are near the bottom. There was an across-the-board improvement in momentum this week as nearly all equities benefited from the surprising strength of the September employment report.
International: We mentioned a week ago that China has probably reached the unsustainable parabolic phase of its advance. As if on cue, China underwent a sharp two-day pullback. However, it essentially recovered that decline and ended the week little changed from where it started. A cooling off period would be welcome by most long-term investors at this stage. Emerging Markets continue to exhibit superior relative strength versus the world’s three largest capitalized markets: USA, UK, and Japan.
No comments:
Post a Comment