Investors Move out of Mega-cap Tech and into Cyclicals Leading to Mixed US Markets

Market Recap week ending 7/17/2020

US markets were mixed last week as investors moved out of mega-cap technology companies and into cyclical sectors.  The S&P 500 gained 1.3% for the week.  The Dow increased by 2.3%, while the Russell 2000 led with a 3.6% move higher.  The NASDAQ fell 1.1% with notable losses from Amazon, Netflix, and Microsoft.  US Treasuries were again somewhat subdued.  The 2-year yield fell two basis points to close at 0.14%.  The 10-year yield was unchanged at 0.63%.  Gold gained $9 to close at 1810.30.   Oil was little changed with WTI closing at $40.56.  There were no changes to our models.

2nd quarter earnings kicked off last week with many of the Financials beating estimates but as expected also adding huge provisions for loan losses to their balance sheets. Investment banking was a bright spot for some of the banks with nice revenues generated from fixed income deals and the subsequent trading around these offerings.   Investors were inclined throughout the week to rotate out of mega-cap technology and into the financials, industrials, and materials, which are generally viewed as value.  There is a large dispersion of index returns year to date with NASDAQ up 17.1%, the S&P 500 flat, the Dow off 6.5%, and the Russell 2000 off 11.7%.  Traders reversed a bit of the dispersion last week and will be another trend to keep an eye on in the coming weeks. 

Tensions between the US and China increased last week and took some of the shine off emerging markets.  EM was off 1.1% for the week. There was more positive news on efforts for a COVID-19 vaccine.  Trials on Moderna’s vaccine indicated an immune response that generated antibodies on all patients in the trial.  The news sent shares higher and bolstered the health care sector which was up 5.1% for the week.