It was a sea of red last week. Might the skies be parting and letting some green into those waters?
Monday S&P 500 0.37% | NASDAQ 1.32%
The week started with a hangover from the three-day weekend. Equities were led lower by the Tech sector. This area has been a standout performer in markets over the last several years. There appeared to be a rotation out of momentum positions and into cyclical stocks. This came as negotiations between the US and Iran progressed nicely.
Tuesday S&P 500 1.44% | NASDAQ 2.21%
Selling momentum continued Tuesday as the South Korean Market fell 10% overnight with a particular focus on chip stocks. Traders followed suit globally as we saw a widening selloff Tuesday.
Wednesday S&P 500 0.10% | NASDAQ 0.43%
After the two-day route of markets, trading was more muted. Although selling pressure continued in Tech names, value stocks gained a bid. Additionally, risk-off bond exposures saw rates decline (rates and prices move in opposite directions). So, the good news was that it was not just a sell everything mentality at play.
Thursday S&P 500 0.01% | NASDAQ 0.46%
Inflation data out on Thursday affirmed elevated inflation expectations. A higher inflation run rate means the Federal Reserve Bank (FRB) is likely to raise rates before cutting them. Higher rates will cut into profits for growth companies more so than dividend producing value companies. This logic played out in trading on Thursday.
Friday S&P 500 0.05% | NASDAQ 0.46%
The week closed out quietly, however, trading volume was well above the average year to date. The outcome was not indicative of the interest but rather the resulting rotation in equities. There was an unwinding of some of the trades that dominated the week. Tech even saw a bid to close out the day.
Conclusion S&P 500 1.95% | NASDAQ 4.60%
It was a sea of red for the indices across the week. This would only change if we included the Dow Jones Industrial Average as it managed to grow by 0.7%. The shift from Growth stocks to Value stock unwound itself slightly on Friday, signaling, perhaps, that the play was overdone. We will be focused late next week on jobs and soon thereafter it will be earnings season. The centric theme between now and then will likely stay focused on inflation and jobs.
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