Last week was a lot like rolling out of bed on a Monday with high hopes for the week, only to find by late Tuesday that you can pretty well guess how the rest of the week is going to play out. Poorly that is.
The Nasdaq was the last to fall last week, and likewise we saw the return of Momentum and Growth, and the fall of Small Cap and Value stocks for the majority of the week.
As you can see above, Small Caps gained a little back on Friday, but still were definitive losers for the week. These moves could be seen as a flight back to FAANG stocks, those pesky tech giants that have dominated the past few years in the investment landscape. Charted below over the last week for your viewing pleasure.
It certainly suggests a pull-back in confidence among market participants regarding the health / growth of the economy. Small Caps will be hurt most in the case of a protracted recession or even anemic growth.
This flight to safety (or FAANG in this case) was also seen in the bond market with investment grade funds rising slightly, while junk bonds had a pretty horrendous week. Again, this makes sense, in a weakening economy the chance of junk rated debt defaulting goes up significantly, while fund that hold a large share of government securities can benefit as weakening economic numbers will ensure that rates stay at zero for longer.
Earning and Events this Week
Monday – JinkoSolar ($JKS) is the most notable report coming Monday. No releases on the economy Monday.
Tuesday – Lennar ($LEN) reports Tuesday, it will be interesting to see how Covid affected their pace of home building. Also Oracle ($ORCL), a tech bell weather reports. Economically we get job openings and NFIB Small Business Index.
Wednesday – ABM ($ABM) Industries is the one major company reporting today. Economically we get CPI, a budget update and a Jerome Powell news conference, so get excited for that. I’ll bet the fed is not planning on raising rates any time soon ;).
Thursday – We get two stocks reporting that both may have benefited from our propensity to stockpile when things get scary, Kroger ($KR) and Smith and Wesson ($SWBI). Much like other times of crisis, gun background checks have been surging this year, with March seeing 41% more than March 2019. To match that excitement we get Initial Jobless Claims and Total Continuing Jobless Claims, both numbers that could have big impacts on the markets.
Friday – CarMax ($KMX) and Jabil Circuit($JBL) report along with the Consumer sentiment index. CarMax could be an adventure as car sales crashed when quarantines started to lock families in their houses. April and May sales appear to be a whole 80% lower than 2019.
Further Ahead – The following week we get a flood of earnings with nearly 500 companies reporting between 6-22 and 6-26.
Have a health week,
Nathan