In this brief market report, we look at the various asset classes, sectors, equity categories, ETFs, and stocks that moved the market higher and those that moved lower. The idea is to identify newly emerging market leadership.
Identifying the pockets of strength and weakness allows us to see the direction of significant money flows and their origin.
The market correction continues.
Tariff war worries, weakness in consumer spending, recession fears, and declining earnings estimates drove the market lower. Investors continued to pull back from equities (especially tech stocks) and seek safety in Cash, Gold and Treasury bonds. The S&P 500 was down 1.5% for the week and down 10.2% YTD.
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The Death Cross
A death cross happens when the 50 day moving average drops below the 200 day. Market technicians view this as significant in that it confirms the downside momentum on a long term basis. It's not very useful as a market timing tool because much of the damage has already been done by the time this signal is triggered.
What it does show is that the selloff is likely to continue for an extended period of time. The good news is that the last time we had a death cross was in January 2023, just as the market was about to deliver back-to-back annual gains of 20%-plus.
A look at monthly returns.
This chart shows the monthly returns for the past year. April is on track to be the worst month for equity investors in the past 12 months.
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A look at drawdowns this year.
Here is a closer look at the pullbacks we've had over the last 12 months, using a drawdown chart. The current drawdown is -14% from the February 19 high.
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A look at the bull run since it began last October.
This chart highlights the 43% gain in the S&P 500 from the October 2022 low through Friday's close. We are well below the trendline and it looks like we may have further to go on the downside before this correction is over.
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 Volatility, reflecting uncertainty about market direction. The worst performer was Blockchain, as Bitcoin and other cryptos have been under selling pressure.
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Equity sector performance
The energy sector saw a boost last week due to several factors. Notably, Cheniere Energy stood out with a strong 12% gain. This performance was driven by optimism around long-term growth rates in the industry, as earnings are forecasted to grow by 9.8% annually.
Additionally, the sector's valuation remains attractive, with a price-to-earnings ratio of 14x, reflecting investors' low confidence in the recovery of oil prices.
On a year-to-date basis, Utilities is the only sector showing positive momentum. Tech is the worst performing sector.
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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 equity groups were foreign stocks and small cap value. The Mag 7 stocks led the way down once again.
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The S&P Mag 7
Here is a closer look at the Mag 7. These seven stocks are in a bear market YTD, down by 22%. Faith in the AI trade is being tested. Nvidia (NVDA) was hardest hit, down 8.5% for the week.
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The Mag 7 dominance is a drag on performance.
After leading the market higher for the last two years, the Mag 7 are now a drag on the S&P 500 index on a year-to-date basis. The other 493 stocks in the S&P 500 are only down an average of 3.1% YTD.
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The 10 best performing ETFs from last week
The long-suffering Cannabis stocks finally caught a bid last week, up nearly 15%. It shows that investors are hunting for value and tariff-resistant stocks.
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The 10 worst performing ETFs from last week
Semiconductors continue to sell off as the tariff picture is still murky. Chip companies like Nvidia (NVDA) must now obtain a license to export to China, effectively shutting down one of their largest markets.
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Best Performing Stocks
With tariffs on auto imports, Hertz and Avis got a boost this week. Looking at the list of winning stocks reveals that 4 are from the Healthcare sector. This sector has been lagging the market so far this year, but it may be poised for a rebound.
Worst Performing Stocks
UnitedHealth shares took a nosedive Thursday after slashing its annual outlook. The healthcare conglomerate posted quarterly earnings that fell short of Wall Street’s expectations and substantially downgraded its projected results for 2025.
Final thoughts
It looks to me like we're going to be stuck in correction mode for longer than just a few weeks. Now that long term momentum has turned negative, it will probably take several months to climb out of the hole we've dug for ourselves. To recap, in the week just past, investors were:
- Selling Bitcoin and buying Gold
- Selling stocks and buying volatility (VIX)
- Selling semiconductors and buying energy
- Selling Growth and buying Value, especially small and mid-caps
- Selling Cyclicals and buying Defensive names
- Selling the Mag 7 and building cash positions