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“In times of rapid change, experience could be your worst enemy.” – J. Paul Getty
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Bulls finally caught a break last week with the S&P 500 up well over 5%, and they’ll be looking to finish up the quarter on a positive note as we head into the end of the first half. The bears are still comfortably in the lead heading into the half, but a late ‘field goal’ or even ‘touchdown’ for the bulls in the final days would make things look a little more respectable to kick off the second half. Futures are higher this morning but have been drifting as the opening bell approaches and treasury yields rise as the 10-year trades back near 3.2%. Investors continue to be tossed around by moves in the treasury market as market rallies tend to push yields higher and eventually to levels that cause angst on the part of equity investors.
Durable Goods orders were just released and came in higher than expected, while later on, we’ll get updates to Pending Home Sales (10:00 AM Eastern) and the Dallas Fed report for June (10.:30). On the earnings front, we’ll hear from Jefferies (JEF) and Nike (NKE) after the close.
In today’s Morning Lineup, we discuss the news coming out of the G7 meetings, overnight moves in Asian and European markets, US rig counts, and overnight economic data from Asia and Europe.
With gains of over 6%, last week was a very good one for US equities. Good, that is for every sector except Energy. Sectors leading the rally included Consumer Discretionary, Health Care, and Real Estate, but Technology and Utilities also outperformed. Despite the big gains last week, all five sectors are still in the red YTD, and only Health Care is above its 50-day moving average (DMA). Ironically enough, Energy was the only sector down on the week and is the furthest below its 50-DMA, but it is also the only sector up YTD and with a gain of over 30% it’s leaving the other ten sectors in its dust.
Speaking of the Energy sector, while it has easily been the best performing sector over the last year, the last week of the month has been routinely weak for the Energy sector. As shown in the chart below, over the last year, the sector has underperformed the S&P 500 in the last week of the month ten out of twelve times with a median margin of 2.5 percentage points in underperformance. Energy has been a high octane sector lately, but it hasn’t had much in the way of endurance on a month-to-month basis.
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