PAS Weekly Commentary

S&P 500 Closes Below 50-Day Moving Average Despite Good Data

The S&P 500 (-0.6%), Nasdaq Composite (-0.5%), and Dow Jones Industrial Average (-0.1%) ended the week with modest declines, while the small-cap Russell outperformed with a 0.4% gain. The latter turned positive amid quadruple witching-options expiration activity at the end of the week.

To start, let's recap the good economic data investors received this week:

  • Total retail sales surprisingly increased 0.7% m/m in August ( consensus -0.7%)
  • Total CPI increased 0.3% m/m ( consensus +0.4%), which was better than feared
  • The September Philadelphia Fed Index was much better than expected with a reading of 30.7 ( consensus 19.6)
  • The September Empire State Manufacturing Survey was much better than expected with a reading of 34.3 ( consensus 18.6)
  • The 4-week moving average for both initial claims and continuing claims continued to decrease
  • Industrial production data for August increased in-line with expectations, unlike in China where it missed expectations

That's a lot of good news, but nine of the 11 S&P 500 sectors still closed lower. The materials (-3.2%), utilities (-3.1%), industrials (-1.6%), and communication services (-1.2%) sectors underperformed with 1-3% losses. The energy (+3.3%) and consumer discretionary (+0.5%) sectors closed higher.

The inference behind this discrepancy was that the market was wrestling with the peak growth narrative, which entails slower growth rates, especially when considering other negative-sounding factors.

In the corporate space, 3M (MMM), American Express (AXP), Comcast (CMCSA), PNC (PNC), and Timken (TKR) provided cautious-sounding business commentary. Apple (AAPL) didn't excite investors with its annual product event. Oracle (ORCL) provided underwhelming earnings news.

In addition, not only was there uncertainty about infrastructure and the debt ceiling, but there were also growing problems in China. Beijing's regulatory crackdown persisted, a Chinese province entered lockdown because of a Covid outbreak, and reports discussed the possibility of Evergrande -- one of China's largest property developers -- defaulting on its debt.

There was one good rebound day this week, but sellers had a firm grip on the market, leaving the S&P 500 below its 50-day moving average (4436) on a closing basis. The Treasury market saw some selling interest, too, whether it was because of the decent economic data, cash-raising efforts, or technical factors. The 10-yr yield increased three basis points to 1.37%. 

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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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2021-126997 (Exp. 12/21)