Market Update 2/26

Over the past week, the stock market has shown signs of weakness, with major indices struggling to maintain recent gains. Concerns over stubborn inflation and the Federal Reserve’s rate outlook have weighed on investor sentiment, leading to increased volatility. Tech stocks, which had been driving recent rallies, pulled back as bond yields edged higher. Additionally, mixed corporate earnings and softer consumer spending data added to the cautious tone, signaling potential headwinds for the broader market.

Sector Report: Basic Materials:

This sector did quite poorly this week relative to other sectors, sharply falling under the 10, 20, and 50 day moving averages. On the macro side, the materials sector weakened last week as lower commodity prices and global demand concerns weighed on performance. Industrial metals declined, chemicals faced margin pressure, and construction materials saw mixed results. Macro headwinds continue to pose risks.

Consumer Cyclical:

This sector also performed very poorly this week, sharply declining below 10, 20, and 50 day moving averages. Despite poor performance, though, the sector seems to be building higher lows despite negative pressure amidst unsure market conditions. On the macro side, the sector showed weakness as consumer spending softened and retail sales disappointed. Travel and leisure stocks faced pressure, while autos struggled with demand concerns. Financial Services:

This sector, like others, performed poorly this week and seems to be in a choppy consolidation period. It seems to have found support on the 50-day moving average, though, and might recover. Relative to other sectors and the rest of the market, this isn't the worst sector but certainly not the best. On the macro side, banks struggled with higher bond yields impacting loan demand, while insurers remained stable. These conditions negatively impacted the sector, explaining the decline.

Real Estate:

In terms of the chart alone, this sector performed the best. It closed up this past week and seems to be surfing the rising moving averages. On the macro side of things, the sector closed higher as investors looked for stability amid market volatility. REITs saw gains, benefiting from a slight pullback in bond yields and renewed interest in income-generating assets.

Consumer Defensive:

This market is also not looking too bad, performing pretty well despite the market pullback. This sector is showing nice relative strength and seems to be doing well despite the general atmosphere of insecurity in the market right now. On the macro side, it held steady with grocery and household goods showing resilience amid economic uncertainty. However, pricing pressures remain a concern.

Healthcare:

This sector is also performing pretty well despite poor market conditions. The sector shows relative strength, closing slightly up this week and building higher lows while surfing the rising moving averages. This mixed performance can be explained as biotech stocks decline, but large pharmaceutical companies remain defensive.

Utilities:

This sector also isn't doing too bad, as it is showing some nice support and closing relatively flat despite really unknown and insecure market conditions. This stability is due to benefits from defensive positioning as investors seek safety amid broader market uncertainty.

Communication Services:

This sector is doing ok. It started out the week looking very strong however these past two days have been pretty weak, especially today as major indices closed up and this sector closed down. On the macro side this mixed feeling could by explained by media stocks struggling on weak ad revenue while telecoms found support from defensive buying.

Energy:

This sector looks pretty terrible. It's in a year-long range and has no momentum. Furthermore, it's performing far worse than the general market. This is due to years of stagnation within the energy sector and little innovation.

Industrials:

This sector doesn't look that good. It closed down a ton the past week and is showing some relative weakness. Furthermore, it's below the 10, 20, and 50-day moving averages, losing most of the momentum it had gained in the recent move. This is likely due to supply chain issues and weaker manufacturing data hurting sentiment, though defense stocks remained resilient.

Technology:

This sector closed down a lot in the past week. It is performing quite poorly but seemed to has found support and reverted slightly. It's hard to say what's going to say in the future, as the sector is in a multi-month range and doesn't seem to be really moving. This is likely due to higher bond yields weighed on growth stocks, particularly in the semiconductor space.

My overall consensus is that the market is too risky right now. I will be trading less and taking smaller positions as I don't have much conviction in the strength of this market.