Market Commentary: The market’s upside move after the Fed’s interest rate cut last week was short lived. In fact, most equity markets began a short-term downtrend the very next day. As part of their announcement last week, the FOMC did their best to dampen expectations for further cuts. Perhaps that is what the market chose to focus on, or perhaps it was additional subprime related write-offs and disappointing earnings reports. Volatility remains quite high with triple digit moves in the Dow Jones Industrial Average becoming commonplace. Today was a downside day, thanks to General Motors (GM) announcing a $39 billion loss and Morgan Stanley (MS) joining the subprime write-down parade.
The 10-year Treasury yield jumped a bit after last week’s interest rate cut, but like equities, yields on Treasury securities have been in a downtrend the past week. The opposite appears to be true for high-yield bonds as investor nervousness about the domestic economy is causing prices to fall and yields to rise for this group.
Sectors: Surprisingly, not all sectors lost momentum this past week. Technology bucked the trend, especially large-cap technology stocks, by posting solid gains for the week and building on recent momentum. The Energy sector posted very strong gains for the past week, but the overall momentum for this group remained about the same due to high volatility and a steep decline the prior week. The Financial sector, the epicenter of current market weakness, had another setback this past week. Financials continue to react negatively to bad news and should be avoided at least until bad news becomes expected.
Styles: The effect of a weak US dollar can be seen in our style rankings as well as our global rankings. A weak dollar helps large multinational corporations with large overseas operations and sales. These types of companies typically fall into the Large Cap Growth segment. Smaller firms that often import many of their goods and materials and have very little in the way of exports are typically hurt by a weak US dollar.
International: Some of the air was let out the China market this past week. It is something that has been expected for quite a while, as that kind of strength cannot be sustainable for too long. There is nothing to indicate that China is headed for a massive correction at this time, but we wouldn’t be surprised if it languishes for several months. Canada has jumped into the number two spot based on a combination of a strong currency and an economy heavily weighted toward energy and natural resources.
Sectors: Surprisingly, not all sectors lost momentum this past week. Technology bucked the trend, especially large-cap technology stocks, by posting solid gains for the week and building on recent momentum. The Energy sector posted very strong gains for the past week, but the overall momentum for this group remained about the same due to high volatility and a steep decline the prior week. The Financial sector, the epicenter of current market weakness, had another setback this past week. Financials continue to react negatively to bad news and should be avoided at least until bad news becomes expected.
Styles: The effect of a weak US dollar can be seen in our style rankings as well as our global rankings. A weak dollar helps large multinational corporations with large overseas operations and sales. These types of companies typically fall into the Large Cap Growth segment. Smaller firms that often import many of their goods and materials and have very little in the way of exports are typically hurt by a weak US dollar.
International: Some of the air was let out the China market this past week. It is something that has been expected for quite a while, as that kind of strength cannot be sustainable for too long. There is nothing to indicate that China is headed for a massive correction at this time, but we wouldn’t be surprised if it languishes for several months. Canada has jumped into the number two spot based on a combination of a strong currency and an economy heavily weighted toward energy and natural resources.
No comments:
Post a Comment