MARKET RECAP

It was another big week for stocks as US markets advanced by 2.71% and a super strong 3.91% outside the US. Bonds were up 1.46% as interest fell on a good inflation report.

The market appears to be broadening out, the equal-weighted S&P 500 has doubled the S&P 500 performance over the last six weeks, 6% v 3%. The S&P 500 trades at 18.9x earnings, but when you back out the seven leaders (that trade at 40x), the index trades at 15x. Meanwhile, quarterly earnings are expected to drop for the third quarter.

The market appears overbought. 83% of S&P 500 stocks are above their 20-day exponential moving average, 82% are above the 50-day, and 71% are above the 200 day. Two of the last times stocks were at similar metrics, greater than 80/80/70, led to sell-offs. From February 1, 2023, to March 13, the market fell by 6.4%. Prior to that, the other time was at the end of 2021, which turned out to be the last peak of the S&P 500. The market would fall by about 25% over the next ten months.

MARKET RECAP

MARKET RECAP

After a big June where US stocks advanced by  6.73%, stocks were flat this week, +0.01%, while international markets fell slightly, down by 0.36%. Bond took a big loss of 0.96% on higher interest rates. The yield on the 1-year treasury was up by 24 basis points.

The market no longer anticipates a drop in interest rates this year and is counting on a rate increase at the next meeting in late July. Despite falling just shy of the consensus for nonfarm payrolls, the payroll report that came out this week still reflected a solid labor market, thereby putting to rest the chance for a near-term pause in interest rate increases. Payrolls increased by 209,000; the estimate was 230,000. It was the first miss after a 14-month winning streak. The two prior months were revised down by 110,000. The workweek was up to 34.4 hours from 34.3 in May, and average hourly earnings were up by 0.4%. The unemployment rate fell to 3.6% from 3.7%.

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