A rollercoaster week for equities but volatility did fade. Will leadership continue in value stocks as growth is under the microscope?
Monday
S&P 500 0.54% | NASDAQ 0.56%
The first week of February started off strong with the value leaning Dow continuing its climb for the year. Manufacturing strengthened in January. Gains continue in the energy sector, particularly in natural gas, leaving the U.S and global energy outlook unclear.
Tuesday
S&P 500 0.84% | NASDAQ 1.43%
Little economic data was released Tuesday as the attention shifted to earnings. Tech and software stocks were under duress, leading the Nasdaq and S&P500 lower. There was a rotation to small-caps and defensive stocks.
Wednesday
S&P 500 0.51% | NASDAQ 1.51%
Positive news for Services wasn’t enough to alleviate the pressure on growth stocks again on Wednesday. The Dow benefitted from flows on the day climbing by over half a percent. The selling was attributed to concerns about AI spending which can lead to portfolio rebalancing.
Thursday
S&P 500 1.23% | NASDAQ 1.59%
A third consecutive day of sharp drops accelerated as a disappointing jobs report was released. Job openings have declined since their peak in early 2022. A slowing in hiring could lead to lower GDP projections down the road.
Friday
S&P 500 1.97% | NASDAQ 2.18%
Equities surged to close out the week as investors brushed off mid-week jitters on AI. The S&P500 staved off major weekly losses while the Nasdaq was left licking its wounds. Consumer sentiment rose and consumer credit matched spending patterns in December.
Conclusion
S&P 500 0.10% | NASDAQ 1.84%
Sector rotations were the highlight of the week as several big-name tech and software companies sold off. Cyclical and defensive sectors including staples and industrial companies were the beneficiaries of flows out of growth stocks. In terms of market cap, small companies continue to outperform and most notably in value companies. The shift shows investors are looking for undervalued pockets in the market. A risk-on versus risk-off strategy will contend with its positioning in investors’ portfolios throughout the 2nd quarter. First quarter’s earnings will push speculation on sustained growth, but this week it proved that sentiment has shifted from growth. All trends will be reviewed ongoing as this week’s shifts will be closely watched in the weeks ahead.
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