The S&P 500 and NASDAQ Composite declined 0.4% to 1.1% respectively last week. The performance of these indices can, at times, be deceptive since they are cap weighted and when their biggest stock components fall, the index falls. However, digging deeper, we were relieved to find that both the equal weight version of the S&P 500 and the S&P 600 small caps index actually rose. Small caps have been underperforming the S&P 500 since the end of March. While the signals are early, we suspect small caps may be coming alive again which would be very good for investors.
While the US economy continues to rebound, there are concerns that the spread of the Delta variant of Covid-19 could result in an economic stumble if states and local governments reimpose restrictions on businesses. Also, people may curtail spending on travel, bars and restaurants, and general activities out of the home. For now, this doesn't appear to be the case as airline flights and hotel occupancy rates continue to rise. Try to book a dinner reservation. Other concerns include rising inflation, supply shortages and bottlenecks and labor availability.
The S&P 500, NASDAQ Composite, and European indices remain strategically Bullish; Mid and Small Caps came alive last week; Emerging Markets and China in Bear market. Indeed, in July big Chinese tech stocks lost hundreds of billions of dollars of market value after the Chinese government issued a slew of new regulations.
Equity Styles: Large Cap Growth lead vs. Large Cap Value, Small, Mid Cap and equal weight indices beginning to show some signs of weakening.
Ranked Sectors: Leaders - Real Estate, Health Care, Technology, Finance. Laggards - Consumer Staples, Consumer Discretionary, Utilities, Transportation.
The 30-year US Treasury Bond, and 10-year Note Yield trends continue down. Yield curve continues flattening, spread now 1.03
Australian Dollar Bearish, Euro decline appears to be ending. Gold trend is down.
The US Dollar weakened after approaching March 31 high of 93.47. There is a strong base of support at 90-90.50 zone.