Last Friday was a rather sombre end to the week for equity markets, yet it started with such promise.
It's notable that the percentage of S&P 500 stocks trading above their five-day moving average (DMA) dropped from 80% on 2 September to 16% last week. For now, the readings for longer-term moving averages are holding up, though there are areas of weakness. For example, in the IT sector, just 31% of stocks are trading above their 50-DMAs.
Outright sector performance over the last week was also weak, as the IT sector lost 6.08%. Friday’s sell-off was driven by a weaker-than-anticipated US non-farm payrolls report and the re-emergence of concerns about a hard landing or recession in the US economy, caused in part by the US Federal Reserve being behind the curve on interest rates. Sentiment was at a low ebb, as demonstrated by the S&P 500 finishing Friday’s session only fractionally above the weekly low.
The worst performers on the week in the S&P 500, at a stock level, included discount retailer Dollar Tree, which lost 21.57%, and lithium refiner Albemarle, which fell by 16.09%. Oil and energy group APA was down by 13.97% and Super Micro Computer fell 13.89%, now down by more than 50% in the last three months.
Despite Friday’s sell-off, there were gainers on the week. United Airlines added 7.9%, food conglomerate Mondelez gained 6.48%, telecoms provider AT&T was up by 6.12% and cell tower owner American Tower added 5.65%. Dell Technologies and data processor Palantir gained after hours, on reports that they would join the S&P 500, alongside little-known insurer Erie Indemnity. The changes to the index are expected to take place on 23 September.
European equity markets also had a testing week, with the Euro Stoxx 50 falling by 4.4%. All the major indices on the continent were lower, as were those in the UK. At a sector level in Europe, defensive areas such as utilities, telecoms and healthcare finished up on the week. However, consumer discretionary sectors, such as personal and household goods and retail, were down by 7.5% and 5.2% respectively. Luxury brands such as Hermes and LVMH were among the biggest fallers.
Crude oil is trading up by 1% in Europe, while TTF (Dutch) natural gas has added 1.34%. German electricity prices rose by 4.16% on Friday and are now up by 19% over the last month. Gold is largely unchanged, US 10-year bond yields are modestly higher as the US dollar index rallies by 0.23% on the foreign exchanges, and EUR/USD is weaker by 0.2%.
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