It was a constructive week for the bulls. The S&P 500 closed Thursday’s session (4,293.93) more than 20% above its October closing low, which enables it to meet the technical definition of being in a new bull market.
On Friday, the S&P 500 climbed past 4,300 for the first time since August, but it couldn’t maintain that position on a closing basis, ultimately settling just a whisker shy of 4,300.
This was the fourth and seventh straight week of gains for the S&P 500 and Nasdaq, respectively.
There was more broad based participation as money rotated out of mega caps and into other areas of the market. The Invesco S&P 500 Equal Weight ETF (RSP) rose 1.0% this week while the Vanguard Mega Cap Growth ETF (MGK) closed down 0.2%. Some of the mega caps fell prone to profit taking after a big run and to some valuation angst.
A notable exception in that regard was Tesla (TSLA), which jumped 14.2% this week and logged its eleventh straight gain on Friday. Some of that strength followed the announcement of a charging network deal with General Motors (GM).
Apple (AAPL), meanwhile, closed flat this week after introducing its Vision Pro mixed reality headset at its Worldwide Developers Conference on Monday.
The market behaved in a manor that suggest participants were hopeful the economy could avoid a hard landing. The Russell 2000, which is predominately comprised of domestically-oriented stocks, outperformed after lagging so far this year. It was the top performing major index with a 1.9% gain.
That outperformance was helped out by strong regional bank shares. The SPDR S&P Regional Banking ETF (KRE) rose 3.0% this week. That move was partially fueled by Goldman Sachs lowering its probability of a recession in the next 12 months to 25% from 35%, citing receding banking risks.
The S&P 500 financials sector was among the top gainers, up 1.1%. Other top performers included the cyclically-oriented industrials (+1.4%) and energy (+1.7%) sectors. Unsurprisingly, the consumer discretionary sector (+2.4%) logged the biggest gain by a decent margin thanks to Tesla.
On the flip side, the information technology (-0.7%) and consumer staples (-0.5%) sectors saw the biggest declines.
Market participants were also reacting to some softer labor data in the form of the weekly initial jobless claims report, which came in at the highest level (261,000) since November 2021. Other notable data this week included the May ISM Non-Manufacturing Index, which fell to 50.3% from 51.9% in April, skirting the dividing line between expansion and contraction (i.e. the 50% level).
Treasuries settled the week with losses. The 2-yr note yield rose 11 basis points to 4.62% and the 10-yr note yield rose six basis points to 3.75%. This comes ahead of the FOMC decision next Wednesday. Presently, the fed funds futures market is pricing in a 28.8% probability of a 25 basis points rate hike for June and a 69.4% probability of a 25 basis points rate hike for July.
In other central bank news, the Bank of Canada surprised market participants with a 25 basis points rate hike to 4.75%.
Below are truncated summaries of daily action:
Monday:
The stock market closed on a softer note after Friday’s broad-based rally. Things were more mixed in the early going, though, with relative strength from mega cap stocks supporting the broader market. The major indices ultimately settled near their worst levels of the day. Still, there wasn’t any concerted selling interest and index losses were relatively modest.
The market started to fade around 1:00 p.m. ET after Apple (AAPL), which held its Worldwide Developers Conference on Monday, introducing its Vision Pro mixed reality headset, also started to fade along with other mega cap stocks. Apple had been up as much as 2.2% earlier in the session. The Vanguard Mega Cap Growth ETF (MGK), up as much as 0.8%, fell 0.1% while the Invesco S&P 500 Equal Weight ETF (RSP) declined 0.3%.
Growth concerns were part of the market narrative. Those concerns were piqued by the May ISM Non-Manufacturing Index, which fell to 50.3% from 51.9% in April. The dividing line between expansion and contraction is 50.0%.
Weakness in bank stocks was another factor holding the broader market in check. This occurred after The Wall Street Journal reported that large banks could face a 20% increase in capital requirements.
Reviewing Monday’s economic data:
- The IHS Markit Services PMI rose to 54.9 in the final reading for May from 53.6.
- The ISM Non-Manufacturing Index for May decreased to 50.3% from 51.9% in April. The dividing line between expansion and contraction is 50.0%, so the May reading reflects continued growth in the services sector, but at a slower pace than the prior month.
- The key takeaway from the report is that the majority of respondents indicate business conditions are currently stable, yet concerns relative to the slowing economy have been noted, evidenced in part by the downturn in the employment index into contraction territory after three months of growth.
- Factory orders increased 0.4% month-over-month in April following a downwardly revised 0.6% increase (from 0.9%) in March. Shipments of manufactured goods decreased 0.4% month-over-month after declining 0.6% in March.
- The key takeaway from the report is that business spending picked up nicely from March.
Tuesday:
The market had a decent showing on Tuesday. The Russell 2000 paced index level gains while lagging mega cap stocks acted as a drag on the S&P 500, Dow Jones Industrial Average, and Nasdaq. The three major indices were all in negative territory around midday, but rebounded and ended near their best levels by the close.
The strength in the broader market was reflected in the 0.7% gain recorded by the Invesco S&P 500 Equal Weight ETF (RSP). The market-cap weighted S&P 500 rose 0.2%.
Strength from regional bank shares, along with energy stocks, helped to propel the Russell 2000 to a robust 2.7% gain. The SPDR S&P Regional Banking ETF (KRE) rose 5.0% and the SPDR S&P Bank ETF (KBE) rose 4.4%. Those moves were partially influenced by Goldman Sachs lowering its probability of a recession in the next 12 months to 25% from 35%, citing receding banking risks.
Separately, Coinbase Global (COIN) shares tumbled following news that the SEC is charging Coinbase for operating as an unregistered securities exchange, broker, and clearing agency.
There was no U.S. economic data of note on Tuesday.
Wednesday:
Wednesday’s trade shaped up to be fairly upbeat despite a mixed performance at the index level. Considering the scope of mega cap losses, the major indices held up well on higher than average trading volume. The Russell 2000 was a winning standout again, gaining 1.8%.
Amazon.com (AMZN), Alphabet (GOOG), Microsoft (MSFT), and NVIDIA (NVDA) all saw large declines, falling prone to profit taking after a big run and to some valuation angst. Apple (AAPL) also logged a loss for the session. The Vanguard Mega Cap Growth ETF (MGK) fell 1.7%.
Still, the broader market exhibited relative strength. The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.7% as money flowed away from the mega cap space and into other areas with a bias toward economically-sensitive sectors. The market-cap weighted S&P 500, which ran into some resistance after hitting 4,299 in the early going, declined by a modest 0.4%.
Rising market rates were another limiting factor for mega caps and other growth stocks. Treasuries saw an uptick in selling after the Bank of Canada surprised market participants with a 25 basis points rate hike to 4.75%; however, losses were pared late in the day as the mega cap stocks tracked toward their lows for the session. The 2-yr note yield rose two basis points to 4.55% and the 10-yr note yield rose nine basis points to 3.78%.
Reviewing Wednesday’s economic data:
- The weekly MBA Mortgage Applications Index fell 1.4% with purchase applications declining 2.0% and refinancing applications falling 1.0%.
- The U.S. trade deficit widened to $74.6 billion in April from an upwardly revised $60.6 billion (from -$64.2 billion) in March, which was recalculated with annual revisions to the goods and services series. The widening deficit in April was the result of exports being $9.2 billion less than March exports and imports being $4.8 billion more than March imports.
- The key takeaway from the report is the drop in exports, which reflects weakening demand abroad for U.S. goods.
- The weekly EIA Crude Oil Inventories showed a draw of 451,000 barrels after a build of 4.49 million barrels last week.
Consumer credit increased by $23.0 bln in April following a downwardly revised $22.9 bln (from $26.5 bln) in March.
- The key takeaway from the report is that the pace of credit expansion in April was driven by revolving credit, which is apt to stoke concerns that consumers, battling inflation, are relying more on the use of credit cards to maintain their spending activity.
Thursday:
It shaped up to be a decent day for the stock market. True to 2023 form, mega cap stocks were driving a lot of the action in the early going while the broader market showed some weakness. By the close, however, more stocks were participating in the upside moves.
Still, gains in the mega cap space were integral to index performance. Apple (AAPL), Amazon.com (AMZN), which was initiated by Wells Fargo with an Overweight rating, NVIDIA (NVDA), and Tesla (TSLA), which recorded its tenth straight gain, were among the biggest support factors. The Vanguard Mega Cap Growth ETF (MGK) rose 1.0%.
The Invesco S&P 500 Equal Weight ETF (RSP), which had been down 0.6%, closed flat while the market-cap weighted S&P 500, which was flirting with the 4,300 level again, rose 0.6% and finished near its highs of the day.
Market participants were also reacting to the weekly initial jobless claims report, which came in at the highest level (261,000) since November 2021, fueling buying interest in the Treasury market.
Reviewing Thursday’s economic data:
- Initial jobless claims for the week ending June 3 increased 28,000 to 261,000 while continuing jobless claims for the week ending May 27 decreased 37,000 to 1.757 million. Initial claims, which are a leading indicator, hit their highest level since November 2021.
- The key takeaway from the report is the bump seen in initial claims as it connotes some softening in the labor market that the Fed will like to see, although claims levels continue to run well below levels seen in past recessions (i.e., north of 375,000), which is a point that market participants should be relatively pleased to know.
- Wholesale inventories fell 0.1% in April from a revised 0.2% decline in the prior reading (from 0.0%).
- The weekly EIA Natural Gas Inventories showed a build of 104 bcf versus a build of 96 bcf last week.
Friday:
The stock market had a mixed showing to close out a constructive week overall for the bulls. The S&P 500 climbed past 4,300 for the first time since August after yesterday’s closing level (4,293.93) marked a 20% advance off the October closing low, which meets the technical definition of entering a new bull market. The index couldn’t maintain that position on a closing basis, however, ultimately settling the session just a whisker shy of 4,300.
Initially, many stocks were participating in index gains. The Invesco S&P 500 Equal Weight ETF (RSP) was up 0.4% at its high for the day, but closed with a 0.1% loss after many stocks pulled back.
The market reverted back to 2023 form shortly after the open, which is to say that mega cap stocks supported the major indices while the broader market was relatively weak. The Vanguard Mega Cap Growth ETF (MGK), which had been up as much as 1.2%, closed with a 0.4% gain.
The shift in market breadth as the session progressed also reflected underlying weakness. Shortly after the open, advancers and decliners at the NYSE and Nasdaq were nearly even. By the close, decliners led advancers by a 5-to-3 margin at the NYSE and a nearly 2-to-1 margin at the Nasdaq.
There was no U.S. economic data of note on Friday.
Source: Briefing Investor
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Week in Review: Technical Bull [June 9-23]
It was a constructive week for the bulls. The S&P 500 closed Thursday’s session (4,293.93) more than 20% above its October closing low, which enables it to meet the technical definition of being in a new bull market.
On Friday, the S&P 500 climbed past 4,300 for the first time since August, but it couldn’t maintain that position on a closing basis, ultimately settling just a whisker shy of 4,300.
This was the fourth and seventh straight week of gains for the S&P 500 and Nasdaq, respectively.
There was more broad based participation as money rotated out of mega caps and into other areas of the market. The Invesco S&P 500 Equal Weight ETF (RSP) rose 1.0% this week while the Vanguard Mega Cap Growth ETF (MGK) closed down 0.2%. Some of the mega caps fell prone to profit taking after a big run and to some valuation angst.
A notable exception in that regard was Tesla (TSLA), which jumped 14.2% this week and logged its eleventh straight gain on Friday. Some of that strength followed the announcement of a charging network deal with General Motors (GM).
Apple (AAPL), meanwhile, closed flat this week after introducing its Vision Pro mixed reality headset at its Worldwide Developers Conference on Monday.
The market behaved in a manor that suggest participants were hopeful the economy could avoid a hard landing. The Russell 2000, which is predominately comprised of domestically-oriented stocks, outperformed after lagging so far this year. It was the top performing major index with a 1.9% gain.
That outperformance was helped out by strong regional bank shares. The SPDR S&P Regional Banking ETF (KRE) rose 3.0% this week. That move was partially fueled by Goldman Sachs lowering its probability of a recession in the next 12 months to 25% from 35%, citing receding banking risks.
The S&P 500 financials sector was among the top gainers, up 1.1%. Other top performers included the cyclically-oriented industrials (+1.4%) and energy (+1.7%) sectors. Unsurprisingly, the consumer discretionary sector (+2.4%) logged the biggest gain by a decent margin thanks to Tesla.
On the flip side, the information technology (-0.7%) and consumer staples (-0.5%) sectors saw the biggest declines.
Market participants were also reacting to some softer labor data in the form of the weekly initial jobless claims report, which came in at the highest level (261,000) since November 2021. Other notable data this week included the May ISM Non-Manufacturing Index, which fell to 50.3% from 51.9% in April, skirting the dividing line between expansion and contraction (i.e. the 50% level).
Treasuries settled the week with losses. The 2-yr note yield rose 11 basis points to 4.62% and the 10-yr note yield rose six basis points to 3.75%. This comes ahead of the FOMC decision next Wednesday. Presently, the fed funds futures market is pricing in a 28.8% probability of a 25 basis points rate hike for June and a 69.4% probability of a 25 basis points rate hike for July.
In other central bank news, the Bank of Canada surprised market participants with a 25 basis points rate hike to 4.75%.
Below are truncated summaries of daily action:
Monday:
The stock market closed on a softer note after Friday’s broad-based rally. Things were more mixed in the early going, though, with relative strength from mega cap stocks supporting the broader market. The major indices ultimately settled near their worst levels of the day. Still, there wasn’t any concerted selling interest and index losses were relatively modest.
The market started to fade around 1:00 p.m. ET after Apple (AAPL), which held its Worldwide Developers Conference on Monday, introducing its Vision Pro mixed reality headset, also started to fade along with other mega cap stocks. Apple had been up as much as 2.2% earlier in the session. The Vanguard Mega Cap Growth ETF (MGK), up as much as 0.8%, fell 0.1% while the Invesco S&P 500 Equal Weight ETF (RSP) declined 0.3%.
Growth concerns were part of the market narrative. Those concerns were piqued by the May ISM Non-Manufacturing Index, which fell to 50.3% from 51.9% in April. The dividing line between expansion and contraction is 50.0%.
Weakness in bank stocks was another factor holding the broader market in check. This occurred after The Wall Street Journal reported that large banks could face a 20% increase in capital requirements.
Reviewing Monday’s economic data:
Tuesday:
The market had a decent showing on Tuesday. The Russell 2000 paced index level gains while lagging mega cap stocks acted as a drag on the S&P 500, Dow Jones Industrial Average, and Nasdaq. The three major indices were all in negative territory around midday, but rebounded and ended near their best levels by the close.
The strength in the broader market was reflected in the 0.7% gain recorded by the Invesco S&P 500 Equal Weight ETF (RSP). The market-cap weighted S&P 500 rose 0.2%.
Strength from regional bank shares, along with energy stocks, helped to propel the Russell 2000 to a robust 2.7% gain. The SPDR S&P Regional Banking ETF (KRE) rose 5.0% and the SPDR S&P Bank ETF (KBE) rose 4.4%. Those moves were partially influenced by Goldman Sachs lowering its probability of a recession in the next 12 months to 25% from 35%, citing receding banking risks.
Separately, Coinbase Global (COIN) shares tumbled following news that the SEC is charging Coinbase for operating as an unregistered securities exchange, broker, and clearing agency.
There was no U.S. economic data of note on Tuesday.
Wednesday:
Wednesday’s trade shaped up to be fairly upbeat despite a mixed performance at the index level. Considering the scope of mega cap losses, the major indices held up well on higher than average trading volume. The Russell 2000 was a winning standout again, gaining 1.8%.
Amazon.com (AMZN), Alphabet (GOOG), Microsoft (MSFT), and NVIDIA (NVDA) all saw large declines, falling prone to profit taking after a big run and to some valuation angst. Apple (AAPL) also logged a loss for the session. The Vanguard Mega Cap Growth ETF (MGK) fell 1.7%.
Still, the broader market exhibited relative strength. The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.7% as money flowed away from the mega cap space and into other areas with a bias toward economically-sensitive sectors. The market-cap weighted S&P 500, which ran into some resistance after hitting 4,299 in the early going, declined by a modest 0.4%.
Rising market rates were another limiting factor for mega caps and other growth stocks. Treasuries saw an uptick in selling after the Bank of Canada surprised market participants with a 25 basis points rate hike to 4.75%; however, losses were pared late in the day as the mega cap stocks tracked toward their lows for the session. The 2-yr note yield rose two basis points to 4.55% and the 10-yr note yield rose nine basis points to 3.78%.
Reviewing Wednesday’s economic data:
Consumer credit increased by $23.0 bln in April following a downwardly revised $22.9 bln (from $26.5 bln) in March.
Thursday:
It shaped up to be a decent day for the stock market. True to 2023 form, mega cap stocks were driving a lot of the action in the early going while the broader market showed some weakness. By the close, however, more stocks were participating in the upside moves.
Still, gains in the mega cap space were integral to index performance. Apple (AAPL), Amazon.com (AMZN), which was initiated by Wells Fargo with an Overweight rating, NVIDIA (NVDA), and Tesla (TSLA), which recorded its tenth straight gain, were among the biggest support factors. The Vanguard Mega Cap Growth ETF (MGK) rose 1.0%.
The Invesco S&P 500 Equal Weight ETF (RSP), which had been down 0.6%, closed flat while the market-cap weighted S&P 500, which was flirting with the 4,300 level again, rose 0.6% and finished near its highs of the day.
Market participants were also reacting to the weekly initial jobless claims report, which came in at the highest level (261,000) since November 2021, fueling buying interest in the Treasury market.
Reviewing Thursday’s economic data:
Friday:
The stock market had a mixed showing to close out a constructive week overall for the bulls. The S&P 500 climbed past 4,300 for the first time since August after yesterday’s closing level (4,293.93) marked a 20% advance off the October closing low, which meets the technical definition of entering a new bull market. The index couldn’t maintain that position on a closing basis, however, ultimately settling the session just a whisker shy of 4,300.
Initially, many stocks were participating in index gains. The Invesco S&P 500 Equal Weight ETF (RSP) was up 0.4% at its high for the day, but closed with a 0.1% loss after many stocks pulled back.
The market reverted back to 2023 form shortly after the open, which is to say that mega cap stocks supported the major indices while the broader market was relatively weak. The Vanguard Mega Cap Growth ETF (MGK), which had been up as much as 1.2%, closed with a 0.4% gain.
The shift in market breadth as the session progressed also reflected underlying weakness. Shortly after the open, advancers and decliners at the NYSE and Nasdaq were nearly even. By the close, decliners led advancers by a 5-to-3 margin at the NYSE and a nearly 2-to-1 margin at the Nasdaq.
There was no U.S. economic data of note on Friday.
Source: Briefing Investor
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
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