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“I have thought it my duty to exhibit things as they are, not as they ought to be.” – Alexander Hamilton
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After a nice week to kick off the quarter, we are seeing some giveback this morning as all of the major US averages are indicated to open lower. Along with weaker stock prices, crude oil, gold, and crypto are joining the downward bias. Treasuries, however, have bucked the trend with the 10-year yield trading down near 3%.
This week will be an important one for the markets with some key economic data (CPI, PPI, and Retail Sales) as well as the start of earnings season, but it’s starting off slow as there are no significant economic reports and the only earnings report of note is from Pepsi (PEP) after the close.
In today’s Morning Lineup, we discuss moves in Asian and European markets and economic data from around the world.
Last week was a pretty good one for US equities with the S&P 500 up nearly 2% and the Nasdaq up over 4%. Even after the gains, both the Nasdaq and the S&P 500 failed to close above their 50-day moving averages (DMA). The Nasdaq is just fractionally below that level, and the S&P 500 is over 1.5% below its 50-DMA. While the Nasdaq wasn’t able to re-take its 50-DMA, it does appear to have broken a downtrend that has been in place since the Spring. The S&P 500, on the other hand, also remains below its downtrend from the Spring, so it still has more work to do on the upside. Just as the 50-DMA tends to act as support in uptrends, it tends to act as a headwind during downtrends, so this week should prove to be a critical one as we get deeper into Q3. A failure on the part of the indices to break above their respective downtrends or reclaim their short-term moving averages could set the market up for a long earnings season.
Last week’s rally was dominated by the ‘trash’ as the year’s three worst performing sectors were the leaders last week. Consumer Discretionary rallied 6.5% over the last five trading days (July 1st through last Friday), while Technology and Communication Services both surged 4%. Even after these gains, all three sectors are still down well over 20% YTD. On the downside, it was generally the year’s winners that lagged last week as Energy and Utilities both experienced fractional declines. One outlier to the trend was Materials. It was the worst-performing sector over the last five trading days and it is also the fifth worst-performing sector YTD, and one of just two oversold sectors.
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