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Courtesy of David Brown, Chief Market Strategist, Sabrient
The market began the week down, with the S&P 500 closing at 1317. After three consecutive down-weeks, the S&P 500 has lost -4.5% from its May 2nd high and now hovers below its 30-day and 50-day moving averages in a generally negative technical position.
It seems investors finally took stock of the problems lurking outside of Wall Street, specifically Europe’s sovereign debt problems and China’s slowing growth.(Daniel Sckolnik’s posting today on the Sabrient blog (”ETF Periscope: Spain Protests Just May Cause the Running Away of the Bulls“) presents a cogent overview of Europe’s debt problem and paints the dire picture in Spain very well.)
Of course, Europe’s and China’s problems strengthened the dollar, which has battered commodity stocks and the market in general over the past year. While the dollar was pretty much flat last week, it is up 6% from its recent low. Oil prices strengthened a bit but remain down 10% from their recent high.
Other culprits added to the negative mood. Disappointing earnings releases from major companies like Cisco (CSCO), Hewlett-Packard (HPQ), Disney (DIS), Staples (SPLS), and the Gap (GAP) reflected the continued weakness in corporate earnings. Last week’s economic news cast a shadow over our struggling recovery. The Philly Fed report and Empire State index revealed a slowing in the growth of the manufacturing sector; housing starts and existing home sales came in lower than expected; and last week’s initial jobless claims remained stubbornly over 400,000.
Market stats. Last week, Mid-cap Value was the only positive cap/style, up +0.3%. Small-cap Growth, investors’ darling of the past year, was the worst performer again last week, down -0.9%, as traders continued to take profits in this space. (Here are the market stats.)
Energy led the sectors, up +1.3%. Also positive were Utilities (+0.9%), Transportation (+0.8%), Basic Industries (+0.7%), and Consumer Non-Durables (+0.3%). The worst performer was Consumer Durables, down -2.2%, with Capital Goods and Technology joining in the down-more-than-1% group. Technology’s poor performance was no doubt heightened by the disappointing earnings from Hewlett-Packard.
Our forward looking sector model continues to favor Basic Industries, followed closely by Energy, Health Care, and Capital Goods.
Coming up. This week, we will get more hard data about our economy. On Tuesday, new home sales…
