Originally published on August 26, 2023
In this weekly outlook, I examine which asset classes, sectors, stock groups, ETFs and individual stocks are leading the market higher, and which market segments are lagging behind.
by paying close attention By looking at the leaders and laggards, we can learn where and where the big money is going and coming from. Data continued to show signs of broadening market participation. As this trend continues, the durability of the rally is improving.
The S&P 500 continued to pull back.
After hitting a new 2023 high on July 31, the market is now in the process of consolidating gains and extending participation. For the week, the S&P 500 gained 0.8%.
Look at the monthly returns.
This graph shows the monthly returns the past year. The August pullback erased all of July’s gains. It looks like we’re down the 5%-7% that I’ve been expecting.
The bulls broke below the trendline.
The chart highlights that the S&P 500 is up 23.1% from its October 2022 low through Friday’s close. The index is now 8.1% below its closing record high set on Jan. 3, 2022.
The market entered a golden cross pattern on February 2, 2023 (a golden cross occurs when the 50-day moving average crosses the 200-day moving average).
The spread between these two moving averages is widening. Today it stands at 7.7%, more than three times the long-term average of 2.3%. This general phenomenon is one of the reasons I expect a 5-7% pullback in the S&P 500.
Major asset class performance.
Here’s how the major asset classes performed, sorted by last week’s returns. I’ve also included year-to-date returns as well as returns since October 12, 2022 to provide more context.
The best performers last week were precious metals as investors looked for ways to protect their gains against further market losses.
The worst performing asset class last week was volatility. Blockchain companies have lost even more market due to continued weakness in the cryptocurrency space.
Stock sector performance
In this report, I use the extended sector published by Zacks. They use 16 sectors instead of the standard 11. This gives us more granularity in investigating winners and losers.
Tech stocks led gains last week after Nvidia (NVDA) released analyst earnings estimates. The company also raised its guidance for the coming quarters.
Retail was the hardest hit, down -4.37% for the week. The financial press blamed lower-than-expected back-to-school spending for the underwhelming results.
stock group performance
For these groups, I separated the stocks in the S&P 1500 Composite Index based on common characteristics such as growth, value, size, cyclical, defensive, and domestic versus foreign.
Inspired by wild swings in NVDA and TSLA, the top 7 stocks in the S&P by market capitalization were all way higher.
The worst performer was small-cap stocks, which lost -0.96%.
S&P Top 7
Here are seven megacap stocks that have led the market throughout the year. Nvidia rose 6.3% for the week. Tesla was the biggest gainer, up 10.7%.
The 10 best-performing ETFs of the last week
Silver, gold and uranium ETFs were the big winners last week. Cybersecurity also performed well.
The 10 Worst Performing ETFs of the Last Week
Cannabis had another tough week, falling -5.2%. The ETFMG Alternative Harvest ETF is down -32.2% year to date. Retail stocks also had a tough week.
10 Stocks That Performed Best Last Week
Here are the 10 best-performing stocks in the S&P 1500 last week.
Electronics company Fabrinet (FN) rose 38.3% last week. The company reported sales and earnings that beat Wall Street expectations.
The 10 Worst Performing Stocks of the Last Week
Here are the 10 worst-performing stocks in the S&P 1500 last week.
Sempra Energy and Copart both split 2-for-1 last week, and it looks like the shares have been halved. Shares of both companies actually rose slightly this week.
Foot Locker (FL), Peloton (PTON) and Dick’s Sporting Goods (DKS) all tumbled after their earnings reports, dragging footwear and fitness stocks lower.
The S&P 500 gained 0.8% last week, but the near-term trend remains lower. The gains can be attributed to the strong performance of the top seven market leaders, which rose an average of 3.45%. This masks the fact that the market is weak. On an equal weighted basis, the market was down -0.2% for the week.
This tells me that the current callback has not ended yet. Since the recent high on July 31, we have given back 4% of the market’s gains. I’m currently stuck with a 5-7% drawdown.
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Editor’s note: Summary points for this article were selected by the Seeking Alpha editors.