In this brief market report, we look at the various asset classes, sectors, equity categories, exchange-traded funds (ETFs), and stocks that moved the market higher and the market segments that defied the trend by moving lower.
Identifying the pockets of strength and weakness allows us to see the direction of significant money flows and their origin.
The S&P 500 has made 37 new highs so far this year.
The S&P 500 notched its 37th record high on Wednesday of last week. In a typical year, the market makes 14 new highs over the full year. The first half of this year has been particularly strong. Here's a look at the last 4 weeks.
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A look at monthly returns.
This chart shows the monthly returns for the past year. After a string of 5 positive months from November through March, the market hit a speed bump in April. The gains so far in May-July have more than made up for April's decline.
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A look at the April selloff.
Here is a closer look at the April decline, using a drawdown chart. The maximum drawdown was 5.4%.
A look at the bull run since it began last October.
This chart highlights the 57% gain in the S&P 500 from the October 2022 low through Friday's close. We made good progress last week even though Q2 corporate earnings so far have only showed modest improvement over last year.
Major asset class performance.
Here is a look at the performance of the major asset classes, sorted by last week's returns. I also included the returns since the October 12, 2022 low for additional context.
The best performer last week was the small cap Russell 2000. Investors rotated out of large caps and into small and mid-cap stocks. I expect this trend to continue for the next few weeks.
Commodities took a hit last week and they are lagging behind on a YTD basis.
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Equity sector performance
For this report I use the expanded sectors as published by Zacks. They use 16 sectors rather than the standard 11. This gives us added granularity as we survey the winners and losers.
Home construction stocks had a great week, up 11.3%. Retailers and Real Estate also performed well.
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Equity group performance
For the groups, I separate the stocks in the S&P 1500 Composite Index by shared characteristics like growth, value, size, cyclical, defensive, and domestic vs. foreign.
The best performing groups last week were the small caps. Mid-caps weren't far behind as investors shifted from large caps to smaller companies.
The Mag 7 took a hit last week, but I don't believe that the AI rally is over yet.
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The S&P Top 7
Here is a look at the seven mega-cap stocks that have been leading the market over the past year. These seven stocks account for 66% of the total YTD gain in the S&P 500. That's down from 87% just a few months ago, providing evidence that participation in the bull market is broadening once again.
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The S&P Top 7 dominance is fading
The 10 best performing ETFs from last week
Home construction stocks led the pack last week and they have doubled since this bull run began in October 2022. Clean Energy, including Solar, had a strong week as well.
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The 10 worst performing ETFs from last week
Carbon Credit ETFs have had a dismal week, YTD, and bull market run.
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The 10 best performing stocks from last week
Here are the 10 best performing stocks in the S&P 1500 last week. Emergent Biosolutions, the maker of NARCAN (used to treat drug overdoses), is up 343% YTD. That's double the gain in Nvidia.
Super Micro Computer, a server maker, is on fire. It's up 220% year-to-date. It's servers are used for cloud computing and AI applications.
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The 10 worst performing stocks from last week
Here are the 10 worst performing stocks in the S&P 1500 last week.
Cerence beat earnings and revenue projections for Q1 but lowered guidance due to Goodwill impairment.
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Final thoughts
The Goldilocks scenario would be a continuation of the broadening out to include small and mid-caps while still keeping the AI revolution going strong. I think there's a decent chance of pulling that off, as long as Nvidia doesn't stumble on an earnings report.
If the Fed begins to cut rates later this year, the market will likely have a strong finish. All in all, it looks like 2024 is on pace for a strong showing.