In this weekly outlook, I examine the asset classes, sectors, equity groups, ETFs, and individual stocks that are leading the market higher, and which market segments are lagging behind.
By keeping an eye on the leaders and laggards, we can get a sense of where the big money is going, and where it's coming from. Signs that market participation is broadening out are continuing to show up in the data. As this trend continues, it is improving the durability of the rally.
The S&P 500 pullback continues.
A look at monthly returns.
This chart shows the monthly returns for the past year. The August pullback has erased all of the July gains. It looks like we're getting the 5%-7% decline I have been expecting.
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The bull market dips below the trend line.
This chart highlights the 23.1% gain in the S&P 500 from the October 2022 low through Friday's close. The index is now 8.1% below its record high close on January 3, 2022.
The Golden Cross.
The market entered a Golden Cross configuration (a Golden Cross occurs when the 50 day moving average crosses above the 200 day) on February 2, 2023.
The spread between these two moving averages is widening. Today it stands at 7.7%, more than three times as wide as the long term average of 2.3%. This wide spread is one of the reasons I'm expecting a pullback of 5-7% for the S&P 500.
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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 year-to-date returns as well as the returns since the October 12, 2022 low for additional context.
The best performer last week was Precious Metals, as investors looked for ways to protect their gains from further downside in the market.
The worst performing asset class last week was Volatility. Blockchain companies lost more ground, due to continued weakness in the Crypto space.
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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.
Technology stocks led the way higher last week, after NVIDIA blew the doors off of analyst earnings estimates. The company also raised guidance for the next few quarters.
Retail was the hardest hit, losing -4.37% for the week. The financial media blamed the poor showing on weaker-than-expected back to school spending.
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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 S&P Top 7 stocks by market cap led the way higher, inspired by big moves by NVDA and TSLA.
The worst performing group was Small cap value, which lost -0.96%.
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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 all year. Nvidia was up 6.3% for the week. Tesla was the biggest winner, up 10.7%.
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The 10 best performing ETFs from last week
Silver, Gold, and Uranium ETFs were big winners last week. Cybersecurity also did well.
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The 10 worst performing ETFs from last week
Cannabis had another tough week, down -5.2%. The ETFMG Alternative Harvest ETF is down -32.2% year-to-date. Retail stocks also had a tough week.
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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.
Fabrinet, an electronics company, was up 38.3% last week. The company posted sales and earnings that came in better than Wall Street had anticipated.
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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.
Both Sempra Energy and Copart split 2-for-1 last week, making it look like the stocks were cut in half. The shares of both companies actually made small gains for the week.
Foot Locker (FL), Peloton (PTON) and Dick's Sporting Goods (DKS) all crumbled after they announced earnings, dragging footwear and fitness stocks lower.
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Final thoughts
The S&P 500 was up 0.8% last week, but the near-term trend is still lower. The gain can be attributed to the strong showing by the top 7 market leaders, which were up by 3.45% on average. This masks a weaker market. On an equal weighted basis, the market was down by -0.2% for the week.
This tells me that the current pullback is not over yet. We have given back 4% of the market's gains since the recent peak on July 31st. I'm sticking with my 5-7% decline for now.