Week in Review
US stocks got off to a strong start last week, rising more than 6% in the first two trading days. The final three days were controlled by sellers, though, with the S&P 500 ending the week up only 1.5%. Crude oil rallied 16.5% for its best week since March after OPEC+ announced its largest supply cut since 2020. Gold prices rose for the second straight week, while Bitcoin was largely unchanged. The US Dollar rose 0.6% after dropping nearly 2% to start the week. Treasury Notes declined for the tenth consecutive week.
A plethora of labor market data sent mixed signals to the market last week. Job openings fell by nearly 1 million – the biggest month-over-month change since the pandemic – but the Friday payrolls report showed continued job gains and a renewed drop in the unemployment rate to 3.5%. Members of the Federal Reserve have spent the past few weeks reiterating their intentions to continue hiking interest rates until demand falls and inflation softens. Based on last week’s data, it’ll take more to slow this labor market.
Market Internals
Underlying trends in the market are indisputably weak. Less than 20% of stocks are in uptrends, as evidenced by their current positions vs. moving averages of 20, 50, 100, and 200 days. That’s despite last week’s rally of more than 1.5%
Breadth remains weakest in growth-oriented sectors: only 8% of Communication Services stocks, 15% of Consumer Discretionary, and 15% of Information Technology stocks are above their 200-day averages. Utilities and Real Estate are also quite weak after substantial selloffs in recent days. The Energy sector is a notable outlier, as a convincing majority of constituents are in uptrends on short, intermediate, and long-term timeframes.
What’s Ahead
We kick off the third quarter earnings season, with a handful of Industrial companies reporting on Thursday morning before banks dominate the schedule on Friday. Bond markets are closed on Monday for Columbus Day, setting the stage for a quiet start to the week. Tuesday’s only notable report comes from the NFIB as they update their small business optimism index. Things heat up Wednesday with producer price inflation, the latest FOMC minutes, and a 10-year Treasury auction. Consumer prices are released on Thursday, followed by an auction of 30-year Treasuries that afternoon. On Friday, we’ll get updates on retail sales and University of Michigan Consumer Sentiment.