PAS Weekly Commentary

S&P 500 breaks out of six week trading range

The major indices all logged gains this week, which ends a six week stupor for the S&P 500 where it neither gained nor declined more than 1.0%.

The S&P 500 also hit a new closing high for the year on Thursday (4,199) and a new intraday high for the year on Friday (4,212). The index was unable, however, to maintain a posture above 4,200 on a closing basis, which has been an area of stern resistance since August 2022. 

The continued outperformance of the mega cap stocks helped to support index performance, yet more stocks under the surface participated in this week's gains compared to recent weeks.

Market participants were contending with mixed directions signals throughout the week. Optimism about a debt ceiling deal began to emerge after President Biden met with congressional leaders on Tuesday. Commentary from congressional leaders fueled hope that the parties were more aligned with debt ceiling negotiations. That optimism continued to build until Friday when Punchbowl News reporter Jake Sherman tweeted that "debt limit talks between the White House and House Republicans have been paused, per multiple sources involved in the talks."

Some hawkish sounding Fed commentary was also in play this week. Specifically, Dallas Fed President Logan (FOMC voter) said that current data doesn't yet support the Fed pausing in June. St. Louis Fed President Bullard (not an FOMC voter) acknowledged the need to raise rates further since inflation remains persistently high. Although Mr. Bullard does not vote on the 2023 FOMC, his view nonetheless reinforces the notion that Fed officials are not talking rate cuts this year.

Treasuries saw some unwinding of the safety premium this week, especially at the short end of the curve, as participants contemplated the possibility of the Fed raising rates again at the June FOMC meeting. The 2-yr note yield rose 29 basis points this week to 4.27% and the 10-yr note yield rose 23 basis points to 3.69%. 

The bond market was also reacting to the optimism early in the week about debt ceiling talks along with some pleasing price action in regional bank stocks. The SPDR S&P Regional Banking ETF rose 7.8% after Western Alliance (WAL) said its deposits have increased by more than $2 billion since the end of the first quarter. WAL rose 24.9% this week on the news. 

Earnings season is winding down, but this week was punctuated by earnings reports from some key retailers. Dow components Home Depot (HD) and Walmart (WMT) received mixed reactions with HD losing some ground and WMT moving higher after they reported earnings. Target also moved higher on its earnings report while Foot Locker plunged 27% on Friday after reporting disappointing earnings results and issuing dismal guidance.

Most of the S&P 500 sectors logged gains this week led by information technology (+4.2%), consumer discretionary (+2.6%), communication services (+3.1%), and financials (+2.2%). Meanwhile, the utilities (-4.4%) sector saw the biggest decline by a decent margin followed by real estate (-2.4%). 

  • Nasdaq Composite: +3.0% for the week / +20.9% YTD
  • S&P 500: +1.7% for the week / +9.2% YTD
  • Russell 2000: +1.9% for the week / +1.1% YTD
  • Dow Jones Industrial Average: +0.4% for the week / +0.8% YTD
  • S&P Midcap 400: +1.0% for the week / +0.7% YTD

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

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2023-156083 (Exp. 8/23)