Median CPI from Cleveland Fed is the key inflation report.
April not living up to its ‘best month’ billing.
The race is on for global bonds yields. The 10-year yield in the US is heading toward 3% (a level last touched in 2018), in the UK it’s heading toward 2% (a level last seen in 2015) and in Germany it’s heading toward 1% (a level last reached in 2014). While these global benchmarks are each now contending with their own important thresholds, a decade ago, they were all separated by only a few basis points. Prices for bonds move in the opposite direction of yields, and bond traders are learning how dangerous it can be to try to catch a falling knife.
March rally takes some sting off of a challenging Q1.
Short-term strength not yet reflected in longer-term trends.
More new lows than new highs in the US, but Emerging Market new high list expands.
Stocks continued to bounce off of their March lows last week. It’s not quite lipstick on a pig but this move does take some of the sting off of what has been a weak Q1 for equities. All eleven sectors in the S&P 500 are now in positive territory for March, but only three (Energy, Utilities and Financials) have YTD gains and two of those, just barely so. Four sectors, accounting for more than 50% of the market cap of the S&P 500, are still down 8% or more heading into the final week of the quarter.
It has an ominous name, but not much of a signal. The so-called “Death Cross” occurs when the 50-day average closes below the 200-day average. Today, for the 25th time since 1970, that will happen for the S&P 500. This table shows both where the S&P 500 tends to be in relation to its peak when these Death Crosses have occurred in the past and the experience of the index in the wake of past crosses.
Key Takeaway: Large-caps take the 2021 crown as mid-caps & small-caps struggle to get back in gear. US strength not being echoed among global equities. Tactical risk management model gives benefit of the doubt to bulls.
Entering 2022, Real Estate, Technology, Health Care and Consumer Staples hold down the top spots in our S&P 500 sector relative strength rankings.
Our industry group-based heat map shows deteriorating conditions across Energy and Financials and improving conditions in Staples and Utilities. Leadership from defensive groups is not usually consistent with risk-on behavior.
Key Takeaway: Indexes stumble as generals see their armies fleeing the field. Bond yields drop below important thresholds. Rising volatility brings focus back to managing risk.
Energy slipped three spots (from 4th to 7th) in the large-cap rankings last week, and the sector appears even weaker beneath the surface. It's in the ninth spot on an equal-weight basis, and conditions are deteriorating within the mid-cap and small-cap energy space.
Technology remains atop the overall rankings, but relative strength on a short-term basis is from coming from Utilities, Real Estate and Consumer Staples.
Key Takeaway: Cyclical rally needs to prove its strength. New lows and expanding downside volume suggests more fissures beneath the surface. Focus on Value Line Geometric Index for evidence that downside risks are building.
Key Takeaway: Market breadth souring as new lows spike. Absence of breadth thrusts leaves the market adrift and vulnerable to cross breezes. Healthy appetites for risk likely lead to higher bond yields and commodities prices as well as improving broad market trends.
With Energy and Financials experiencing short-term weakness, new leaders have emerged. Consumer Discretionary, Technology and Real Estate are in the top three spots in our relative strength rankings, showing leadership on both an equal-weight and cap-weight basis.
Our industry group heat map shows Semiconductor strength is fueling the leadership coming from the Tech sector.
Key Takeaway: Inflation remains hot as narratives shift. Yields perk up as the bond market takes notice of price pressure. Gold catches a bid as real rates remain negative. Breadth trends point to US leadership.
Recent leaders have become near-term laggards, with Energy and Financials dropping to the bottom of the shorter-term relative strength rankings. Energy remains strong overall across the rankings and our industry group heat map. The cooling in Financials could be more significant.
Materials is gaining strength from a sector ranking perspective and is seeing improving trends in our industry group work. We are also seeing pockets of strength within Industrials (Capital Goods and Transportation) and Tech (Semiconductors).
