US Equities were volatile last week. They are caught between the opposing forces of inflation concerns and growth of the economy, including signs that the pace of growth may be slowing.
Stocks made a weekly low on Wednesday as interest rates spiked briefly, before falling by the weekend. As rates fell, stocks, particularly NASDAQ stocks, perked up on Thursday suggesting to some that maybe, tech is back in favor over economically sensitive stocks. This roller-coaster action underscores the short-term trend reversals of Large Cap Growth vs. Large Cap Value that we have been experiencing since early March. We should mention that Tech and Large Cap Growth stocks were due for a bounce as they were, in the short-term, oversold. In confusing market and economic environments, we take direction from longer-term indicators and measurements and expect shorter-term volatility within those trends. For now, economic growth looks fine, and the Fed appears in no hurry to raise rates.
There are concerns. The up-trends of small and mid-cap stocks have begun to weaken. Interest rates are moving sideways in a trading range and have slacked off modestly. However, they are going to run into rising longer term support trends. At that point rates should move higher or begin to fall as peak economic growth passes. We should not dismiss that the Chinese stock market is strategically Bearish, and that China is the world's 2nd largest economy. This situation bears watching.
The S&P large, mid, small cap and Europe indices remain strategically Bullish. However up-trends of S&P mid and small cap are now weakening.
Equity Styles (one month rank): Large Cap Value stronger vs. Large Cap Growth. Large Cap Value gaining vs. small and mid-cap indexes. S&P 500 Equal Weight leading S&P 500 cap weight.
Ranked Sectors: Leaders - Energy, Financials, Transportation Industry Group, Materials, Industrials; Laggards - Health Care, Consumer Staples, Technology, Utilities.
30-year US Treasury Bond and 10-year Note Yields moving sideways but nearing Long Term trend lines which may provide support. Yield curve is positive with spread moving sideways with upward bias, nearing rising trend line which may provide support.
Australian Dollar, and the Euro weakened slightly, British Pound strengthened; Yen is Bearish. Gold is strategically Bullish and is short term overbought. The US Dollar is strategically Bearish, nearing February 25th low and may try to make a triple bottom. Depends on US interest rates.
Nasdaq Composite and Emerging Markets rated strategic Bear Alert.