SPYV - The 1-Minute Market Report August 5 2023
2023-08-07 15:40:00 ET
Summary
- After making a new 2023 high on Monday, the market sold off for the next four days.
- The best performer last week was Volatility, as investors were concerned by the Fitch downgrade.
- The market made another new high for 2023 on Monday. For the rest of the week, it was all downhill.
Originally posted on August 5, 2023
In this week's issue of the 1-Minute Market Report, I examine the asset classes, sectors, equity groups, ETFs, and stocks that led the market lower, and which market segments bucked the trend by moving up.
By keeping an eye on the leaders and laggards, we can get a sense of where the big money is going, and where it's coming from. Signs that market participation is broadening out are continuing to show up in the data. As this trend continues, it is improving the durability of the rally. Details to follow.
The S&P 500 rally takes a rest
After making a new 2023 high on Monday, the market sold off for the next four days. For the week, the S&P 500 was down 2.3%.
A look at monthly returns
This chart shows the monthly returns for the past year. After gaining 3.1% in July, August is starting out in negative territory. The Fitch downgrade of US Treasury bonds set a negative tone for the market.
The bull market continues
This chart highlights the 25.2% gain in the S&P 500 from the October 2022 low through Friday's close. The index is now just 6.6% below its record-high close on January 3, 2022.
The Golden Cross
The market entered a Death Cross configuration (a Death Cross occurs when the 50-day moving average crosses below the 200-day) on March 14, 2022. The Death Cross ended on February 2, 2023. We are now in a Golden Cross configuration, with the 50-day above the 200-day.
The spread between these two moving averages is widening. Today, it stands at 7.7%, more than three times as wide as the long-term average of 2.3%. This widespread is one of the reasons I'm expecting a pullback of 5-7% for the S&P 500.
Major asset class performance
Here is a look at the performance of the major asset classes, sorted by last week's returns. I also included the year-to-date returns as well as the returns since the October 12, 2022 low for additional context.
The best performer last week was Volatility, as investors were concerned by the Fitch downgrade.
The worst-performing asset class last week was Blockchain, which gave up 5.3%. This asset class is still leading the pack on a YTD basis, up 60.5%.
Equity sector performance
For this report, I use the expanded sectors as published by Zacks. They use 16 sectors rather than the standard 11. This gives us added granularity as we survey the winners and losers.
Energy stocks led the way higher last week thanks to a rebound in crude oil and natural gas prices. This was the only sector to post a gain for the week.
Utilities and Autos were the hardest hit, losing more than 4% each for the week.
Equity group performance
For the groups, I separate the stocks in the S&P 1500 Composite Index by shared characteristics like growth, value, size, cyclical, defensive, and domestic vs. foreign.
The S&P Top 7 stocks have become more volatile lately. Over the past three weeks, they have swung from last place to first place, and now to last place again.
Small and Mid Caps continue to outperform Large Caps, as participation in the rally broadens out. Foreign stocks underperformed their US counterparts as the Eurozone enters recession territory.
The S&P Top 7
Here is a look at the seven mega-cap stocks that have been leading the market all year. Apple ( AAPL ) gave back 7.1% as iPhone sales underwhelmed the Street. Amazon ( AMZN ) was the only winner, as they blew the doors off of analyst earnings estimates. The company has been cutting costs by reducing headcount over the past year.
The 10 best-performing ETFs from last week
The ETF leaderboard was dominated by physical commodity producers last week. Uranium, Oil, Natural Gas, and Palladium all had a good week.
The 10 worst-performing ETFs from last week
Last week's losers were dominated by technology-based ETFs.
The 10 best-performing stocks from last week
Here are the 10 best-performing stocks in the S&P 1500 last week.
Tupperware ( TUP ) is up 350% over the past three weeks.
TDS jumped 85% last week on news that they are exploring a possible sale or spinoff of the 80%-owned US Cellular.
The 10 worst-performing stocks from last week
Here are the 10 worst-performing stocks in the S&P 1500 last week.
According to a Barron's story, "DXC Technology Stock Sinks as Analysts Say Progress Is 'Reversing'."
FTNT , a cybersecurity provider, fell on news that several deals have been delayed due to the impact of higher interest rates. Earnings disappointed the Street.
Final thoughts
The market made another new high for 2023 on Monday. For the rest of the week, it was all downhill. The mega-cap tech stocks led the way down. The good news is that market leadership is continuing to broaden out.
I have been expecting a pullback of 5-7%, which may have already begun. This would wring some of the froth out of the market and allow earnings to catch up with prices. As long as small caps, mid-caps, and value stocks continue to outperform the S&P Top 7 mega-caps, I think a 5-7% pullback would improve the sustainability of this bull market.
Are you looking for more high quality ideas? Consider joining The ZenInvestor Top 7 , my Marketplace service. The Top 7 is a factor-based trading strategy. Its screening algorithm prioritizes reasonable price first, then the momentum, and finally projected earnings growth. The strategy produces 5-7 names, and rebalances every 4 weeks (13 times per year). The goal is to catch healthy companies that have gone through a rough period, and are now showing signs of making a strong comeback. Join now with a two-week free trial .
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
The 1-Minute Market Report August 5, 2023