Weekly Market Wrap: May 22, 2023

Week in Review

The NASDAQ continued to lead stock prices higher last week, rising 3% to close at its best level since last August. It has now risen 21% in 2023. The Dow Jones Industrial, meanwhile, has gained a paltry 0.8%. The disparity highlights how widely distributed gains have been so far this year within the benchmark S&P 500 index, which is splitting the difference with a 9% year-to-date rise. The US Dollar index climbed for the second straight week, mirroring a rise in interest rates. Gold and Bitcoin both fell, while oil prices rose 2%.

Market Internals

Last week’s index breakouts lends credibility to the existence of a new bull market in stocks. Market breadth is less convincing. On each 20, 50, 100, and 200-day timeframes, the majority of S&P 500 stocks are below their moving averages. That’s not something you’d expect to see during a healthy market advance – especially since those same measures were more favorable earlier this year, when the index itself was lower.

How can the entire market index advance while most stocks are stuck in the mud? Leadership is key. Trends are healthiest in the growth sector – Information Technology, Consumer Discretionary, and Communication Services – and those 3 sectors are home to 8 of the 9 largest issues in the S&P 500. Wherever mega cap growth goes, so goes the index.

What’s Ahead

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