Market Commentary: Equity markets took a breather this week amid traders’ anxiety surrounding the latest corporate earnings announcements. For the most part, earnings are coming in as expected – lower for financial companies with exposure to the subprime lending market and higher for companies feeding the global demand for raw materials. More than 70% of the announcements have contained positive surprises, but it is still early in the cycle with only 71 of the S&P 500 companies reporting so far.
Concerns are once again being raised that mortgage losses could accelerate and that the housing slump may have further to go, even with housing starts at a 14-year low. Additionally, the government’s core inflation figures do not reflect the impact of $87 oil and higher food prices. As a result, the 10-year Treasury yield dropped to 4.55% today from a level of 4.65% yesterday.
Sectors: Energy has reclaimed the top spot from Materials in our sector rankings as oil rose to nearly $88 this past week. Technology has been gaining ground and received another boost when Intel (INTC) announced better than expected earnings. Financials and Consumer Discretionary are now exhibiting renewed weakness, calling their recent rally attempts into question.
Styles: Although the market pulled back slightly this past week, Large Cap Growth held up the best, which is an indication that it is prepared to provide the fourth quarter leadership. We are starting to see a greater degree of dispersion among the various styles with 20 points now separating the top and bottom of our style rankings.
International: China continues to confound the naysayers by rocketing forward to new highs once again. China has been outperforming all other global markets by a significant amount for an extended period. There will come a time when it greatly underperforms global markets, but attempts to predict that slowdown have not been successful.
Sectors: Energy has reclaimed the top spot from Materials in our sector rankings as oil rose to nearly $88 this past week. Technology has been gaining ground and received another boost when Intel (INTC) announced better than expected earnings. Financials and Consumer Discretionary are now exhibiting renewed weakness, calling their recent rally attempts into question.
Styles: Although the market pulled back slightly this past week, Large Cap Growth held up the best, which is an indication that it is prepared to provide the fourth quarter leadership. We are starting to see a greater degree of dispersion among the various styles with 20 points now separating the top and bottom of our style rankings.
International: China continues to confound the naysayers by rocketing forward to new highs once again. China has been outperforming all other global markets by a significant amount for an extended period. There will come a time when it greatly underperforms global markets, but attempts to predict that slowdown have not been successful.
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