Most Major U.S. stock indexes rose modestly last week, maintaining positive momentum after a sharp rally in the previous week produced the biggest weekly gain so far in 2023.
Last week, the NASDAQ 100 Index added more than 2.8 % and is now up nearly 33% for the year to date, finishing over 15,500 the highest close in nearly 3 1/2 months. The S&P 500 rose more than 1%, is up 16.6% for the year, and finished over 4400 for the first time in nearly two months.
However, all was not rosy, as a week after surging nearly 8%, the IWM small-cap stock index posted a more than 3% weekly decline that significantly lagged the moderately positive results of its large-cap peers. The result left the Russell 2000 Index in slightly negative territory on a year-to-date basis and down 15% from a recent high on July 31.
In addition, the TRAN or Transportation index also lost ground losing more than 1.2 % for the week. These two negatively diverging sectors are somewhat concerning and could be a drag on further progress in the days ahead unless they quickly play catch up to confirm the recent new multi-week highs in the NDX & SPX.
It was one of the final weeks of major third-quarter corporate earnings releases, and upside surprises from some technology-oriented firms appeared to provide support to the growth indexes. in particular, high-valuation software stocks seemed to get a general boost from cloud monitoring and security firm Datadog, which surged 28% on Tuesday following stronger-than-expected earnings and guidance.
U.S. Treasury debt auctions during the week seemed to play an uncommonly large role in driving sentiment in both the equity and bond markets.
Shifts in the interest-rate outlook continued to drive fixed-income markets as U.S. government bond prices reversed course, retreating in the wake of a rally the previous week. As a result, yields rose, with the rate-sensitive 2-year Treasury climbing back above 5.00% after U.S. Federal Reserve Chair Jerome Powell said on Thursday that the central bank may not yet be done trying to contain inflation.
Oil prices fell for the third week in a row to the lowest level since mid-July as mixed data on the global economy raised concerns about demand for oil. On Friday, U.S. crude was trading for around $77 per barrel, down from about $89 three weeks earlier.
In summary, despite the larger cap indices making further progress last week, we are closely monitoring the action in the Transportation and small-cap stocks for clues to what may lie ahead. Although it may not necessarily be needed, certainly a confirmation from those sectors could mean the current market rally can extend into a stronger year-end rally
We’ll likely soon see!
And remember, Trade what you see, not what you think!
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