The 1-Minute Market Report July 8, 2023

Originally posted on July 8, 2023

In today's issue of the 1-Minute Market Report, I examine the asset classes, sectors, equity groups, and ETFs that led the market lower last week, and which market segments bucked the trend by moving higher.

By keeping an eye on the leaders and laggards, we can get a sense of where the big money is going, and where it's coming from. Despite the fact that we had a down week, there are signs that market participation is beginning to broaden out. If this trend continues, it will improve the durability of the rally. Details to follow.

The S&P 500 rally takes another breather

After making a new 2023 high on Monday, the market spent the next three days backing and filling. For the week, it was down 1.2%. Bonds sold off as well, with the 10-year Treasury rate finishing the week above 4% for the first time since March.

July starts off in the red

This chart shows the monthly returns for the past year. After a strong performance in June, the market has started July in the red. The financial media blames the uptick in rates for the weak start.

The bull market is alive and well

This chart highlights the 23.0% gain in the S&P 500 from the October 2022 low through Friday's close. The index is up 14.6% year to date and is 8.3% below its record-high close on January 3, 2022.

The Golden Cross

The market entered a Death Cross configuration (a Death Cross occurs when the 50-day moving average crosses below the 200-day) on March 14, 2022. The Death Cross ended on February 2, 2023. We are now in a Golden Cross configuration, with the 50-day above the 200-day. The spread between these two moving averages is widening.

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 year-to-date returns as well as the returns since the October 12, 2022, low for additional context.

The best performer last week (and the week before) was the EQM Blockchain Index, which is designed to measure the performance of global companies actively involved in the development and implementation of blockchain technologies. The index includes a diversified range of companies, including those engaged in blockchain applications, digital asset mining, cryptocurrency exchanges, blockchain-enabled financial services, and other related activities.

The worst-performing asset class last week was European equities. European stock markets fell sharply as traders digested new economic data from the U.S. The pan-European Stoxx 600 index closed down 2.9%. All sectors and major bourses finished in the red. Travel and leisure led losses with a 4% drop, followed by retail stocks, which were down 3.7%.

Equity sector performance

For this report, I use the expanded sectors as published by Zacks. They use 16 sectors rather than the standard 11. This gives us added granularity as we survey the winners and losers.

As an indication that the market rally is beginning to broaden out, 12 of the 16 sectors outperformed the S&P 500 index last week. There was a rotation out of Construction and Healthcare and into Autos and Real Estate.

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.

After taking a brief rest, the S&P Top 7 rebounded last week. The biggest winner in this group was Tesla (TSLA), which gained 4.8% for the week.

Emerging Markets outperformed Developed Markets, and Value outperformed Growth.

The 10 best-performing ETFs from last week

The 10 worst-performing ETFs from last week

Final thoughts

The market made a new high for 2023 on Monday. The pullback since then has been mild and orderly. I have been expecting a 5-7% correction to take some of the froth out of the mega-cap tech stocks. With inflation coming down, a robust jobs market, and healthy consumer spending, I don't see a big crash on the horizon.

The signs that more market segments are starting to participate in the rally are clear, at least for now. As the weeks and months go by, I expect to see more participation in this bull market. At some point, bearish investors who have been hoarding cash will begin to put that cash to work as the fear of missing out kicks in.

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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.