Tag: Investing

The Weekly Grind: October 30, 2023

Week in Review

The S&P 500 index fell by more than 2% last week, bringing the total decline to more than 10% since stock prices peaked in late July. The Dow Jones Industrial Average is now solidly in negative territory for the year, and even the NASDAQ Composite’s 20% gain looks modest compared to the near-40% mark set earlier this year. Interest rates stabilized during the week after the 10 Year Treasury yield briefly touched 5%, and the US Dollar Index continued to mark time as it has since the end of September. Gold gained more than 1% for the third straight week, but Bitcoin stole the show when it jumped by nearly 20% and reached its highest level in more than a year.

Preliminary data indicated that third quarter economic activity was strong, and the first estimate of GDP lived up to the hype. The economy grew at a 4.9% annualized rate in 3Q 2023, among the best prints over the last 20 years.

At this week’s FOMC meeting, Jerome Powell & Co. will have to decide whether the economic acceleration is consistent with their price stability mandate. Almost no one believes they’ll raise rates on Wednesday (futures markets are pricing in a 0.0% chance as of this writing), but the post-meeting press conference could give us additional clues as to how Fed members see the path of rates in 2024. Or not. After their meeting last week, European Central Bank head Christine Lagarde stressed that now is not the time to be giving forward guidance, given the uncertainty of the outlook.

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The Weekly Grind: October 16, 2023

The S&P 500 index rose for the second straight week, despite steep intraday selloffs on both Thursday and Friday. Interest rates fell sharply to start the week, with the 10-Year Treasury dropping from the previous Friday’s high of 4.9% to just 4.5%. However, Thursday morning’s hotter than expected inflation report marked the trough, and rates ended the week above 4.6%. Commodities were the big winners, as Gold prices surged 5.5% and oil jumped 5.9%.

One year ago, CPI inflation was at 8.2% per year, just off its highs. At the same time, though, inflation excluding the cost of housing, was dropping below 2% on a 3-month annualized basis. Housing costs matter, of course, but the government’s method for measuring housing costs notoriously lags the real-world experience. So when this pared-back measure of inflation reached the Federal Reserve’s target, equity markets responded by putting in their bear market lows. Today, the ex-housing measure has fallen perfectly to the Fed’s target – it’s at 1.98% over the past year. The shorter-term measure, however, is showing signs of reacceleration – it’s back up to 4.5%

Energy prices are to blame for the reversal. The cost of energy has jumped at an annualized rate of more than 30% over the past quarter.

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Top Charts from the Health Care Sector

Our job as technicians is to find trends, with the belief that trends are more likely to persist than reverse course.

One of the easiest ways to identify those trends is to look at a stock’s current price and compare it to the level and direction of a moving average of trailing prices. If the current price is above a rising moving average (MA), then prices are in an uptrend. Below a falling MA, a downtrend. Pretty simple, right?

Things are a little more difficult when you get mixed signals: the level says one thing, but the MA trend says another. What if price is above a falling MA? That’s key first step toward a new uptrend, but it doesn’t always mean prices have bottomed. The same logic holds for a price that’s below a rising MA.

So what do you call it when prices are directly on top of a flat moving average? In this case, we call it Health Care.

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(Premium) Consumer Staples Sector Deep Dive – October

Most of the market is off to a strong start in October. Just not the Consumer Staples sector.

Since the S&P 500 bottomed on October 3, it’s risen 3.5%. Over that time 10 of the index’s 11 sectors are up at least 2.4% from their respective lows. Consumer Staples meanwhile, has risen just 0.5%.

And if today’s trading holds, the sector will touch a new year-to-date low.

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The Weekly Grind: October 9, 2023

Week in Review

The S&P 500 rose in the first week of October after 4 consecutive weeks of decline. Another streak also ended last week, when the US Dollar index failed to close higher. The Dollar’s run ended just short of the record set back in 2014. Interest rates, meanwhile, continued to rise, with 30-year Treasury yields briefly surpassing 5%. Crude oil dropped sharply. It’s 9% selloff was the worst since the failure of SVB back in March.

All year, economists have been waiting for the ‘inevitable’ recession that comes with a massive Federal Reserve tightening cycle. Jerome Powell & Co. have raised short-term interest rates by more than 5% since last spring, the fastest pace of hikes since Paul Volcker’s efforts to break the back of inflation in the 1980s. But instead of recession, the US economy keeps on chugging along. The US added 336,000 jobs in September, the best payrolls print since January. That keeps the number of job openings per unemployed worker at roughly 1.5 – far higher than anything the country experienced prior to 2020.

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The Weekly Grind: October 2, 2023

Week in Review

The NASDAQ Composite managed to close higher last week, ending its lowing streak at 3. The Dow Jones Industrial Average wasn’t quite so lucky. It dropped 1.3%, bringing its year-to-date gain to just 1.1%. The US Dollar Index rose for the 11th straight week, only the second time in the index’s history that we’ve seen that feat. Next week, we’ll try to match the record set back in 2014. Interest rates continued to rise as well, with 5, 10, and 30-year Treasury yields all reaching their highest levels in more than a decade. Gold dropped 4% – it’s worst weekly performance in more than 2 years – and oil prices continued to drift higher.

Stocks lived up to (or in this case, down to) their seasonal reputation in September. Over the last 70 years, September has been the worst month for the S&P 500 index, resulting in an average decline of 0.6%. This year, the index fell 4.9% for the month. Ready for the good news? The fourth quarter is is typically the best of the year. Since 1950, stocks have risen 4.2% on average in Q4.

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The Weekly Grind: September 18, 2023

The US Dollar index has risen for 9 weeks in a row. That’s only happened two other times: 2014 and 1997. Crude oil, meanwhile, has risen 10 of the last 12 weeks, and so has the price of 10-Year Treasury futures. Equity indexes were mostly unchanged for the week, and gold and bitcoin both rose modestly.

Nobody said getting inflation under control would be easy. After more than a year of decelerating price increases from last summer’s peak inflation rate, prices are heading the wrong way once again. Last week’s data release showed the Consumer Price Index jumped to 3.7% in August, up from June’s 3% annual rate, and still well above the Federal Reserve’s 2% annual target. A rebound in energy prices (thanks in part to the aforementioned rally in crude oil) is largely to blame for the disappointing inflation report, while the contribution from food and services continues to decline.

At this week’s FOMC meeting, Fed officials will have to contend with the troubling reversal in CPI while balancing the risks to economic growth.

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Top Charts from the Consumer Staples Sector

The Consumer Staples sector has hovered near the flat line all year, despite a big gain for the benchmark S&P 500 index. Only the Utilities have turned in a worse performance so far in 2023.

Perhaps the final quarter of the year will be a different story? October, November, and December have historically been the best months of the year to own the Staples, so they’re worth watching closely for any signs of a bounce.

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