Winning Streak Snapped

Winning Streak Snapped

The stock market's five-week winning streak was put to an end this week, as well as the S&P 500's eight-session winning streak and the Nasdaq Composite's 11-session winning streak. Both declined 0.3% and 0.7%, respectively, while the Dow Jones Industrial Average fell 0.6% and the Russell 2000 fell 1.0%.

The consumer discretionary (-3.2%) and energy (-1.7%) sectors were by far the weakest performers with 3.2% and 1.7% declines, respectively. The former was pressured by a 15% decline in Tesla (TSLA), as CEO Elon Musk started to sell shares in accordance with a Twitter poll that indicated he sell 10% of his stake. 

Five of the 11 S&P 500 sectors, however, closed higher. The materials sector was impressive with a 2.5% gain, although no other sector rose at least 0.7%.

The impetus for the setback at the index level was profit-taking interest and a sharp rise in Treasury yields, which were catalyzed by hawkish Fed expectations for next year following a hotter-than-expected Consumer Price Index for October.

Specifically, total CPI rose 0.9% m/m ( consensus +0.6%) and was up 6.2% yr/yr -- the largest 12-month increase since November 1990. Core CPI, which excludes food and energy, rose 0.6% m/m ( consensus +0.4%) and was up 4.6% yr/yr.

As of 4:05 p.m. ET Friday, the probability for a rate hike in June 2022 was 69.1%, versus 50.9% last week, according to the CME Fed Watch Tool. The probability for a second rate hike next November increased to 64.9% from 44.7% last week.

The 2-yr yield rose 12 basis points to 0.52%, and the 10-yr yield rose 13 basis points to 1.58%. The U.S. Dollar Index rose 0.8% to 95.09.

Walt Disney (DIS) and Rivian (RIVN) were two other story stocks. Disney shares dropped 8% following its earnings report. RIVN finished 66% above its IPO price, bringing the EV-maker's market capitalization over $110 billion.

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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.

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2021-129900 (Exp. 02/22)