AdvisorShares Weekly Market Review – Week Ending 11/13/2015
Highlights of the Prior Week
Wait, What Happened to the Rally?
What a difference a week makes as it was not too long ago that markets were rejoicing in a six week rally capped off by a very well received jobs report on November 6th. The week that just ended had many interesting reports to ponder in addition to the still unfolding terror incident in Paris.
The earnings season may have saved the most interesting for last as there was carnage for two different mature retail chains in the wake of their earnings news. While neither stock actually has a large weighting in SPDR’s retail focused ETF, their respective mid-teen percentage drops appear to have contributed to the ETF’s more than 7% decline. Another problem for the group was that retail sales were up 0.1%, which was below expectations. Bespoke Investment Group reported that nine of the eleven retail sales reports this year were below expectations while the other two were in line with expectations.
Domestic equity markets were down heavily for the week. The Dow Jones Industrial Average fell 3.71%, the S&P 500 dropped 3.62%, the NASDAQ fell an even steeper 4.25% and the Russell 2000 gave up 4.33%. Perhaps even more significant than the declines themselves might be the support levels taken out on the way down. On the Thursday the S&P 500 went below its 200 day moving average which is of course a key technical indicator for many. If there is a positive story with the 200 DMA though, it would be that after the slope (of the moving average not the index) went negative in August it is now slightly upward sloping. These types of things have been important during past critical turning points and so maybe again.
Foreign equity markets were generally lower as well other than the Nikkei 225, which rallied 1.69%. The Hang Seng fell 2.69%, the ASX declined 3.14 but the Shanghai Composite barely dipped at all, only giving up 26 basis points. Losses in Europe were also pronounced with the DAX falling 2.54%, the CAC 40 giving up 3.66% while the FTSE 100 slid 3.71%.
The yield on the ten-year US Treasury note fell for the week, which is not a surprise but that the yield only fell five basis points to 2.28%. Making the slightness of the drop all the more surprising was the PPI report which printed -0.4% for the headline number and -0.3% for the core number. Perhaps the recent decline at the gas pump has not gone directly to the retailers as many thought even as the decline in West Texas Intermediate Crude accelerated last week falling 8.8% to $40.73. Gold’s participation in the deflationary week was held to a decline of less than 1%.
Rounding up the global bond markets we track for the report, the German bund fell 13 basis points to 0.56%, the French OAT couldn’t hold 1% very long as it dropped to 0.87%, Switzerland now yields -0.30%, Spain fell to 1.78% and Italy now yields 1.56%.
ETF News & Data
There were six new ETFs launched last week including a fund from iShares that tracks an international version of the Aggregate Bond Index as well as an actively managed convertible bond ETF from First Trust.
There were large inflows into broad based equity funds and outflows from sector ETFs perhaps evidence of relative risk coming off the table. There were also large flows out of the high yield space.
Anything related to Mount Everest always makes for interesting reading including Everest Pioneer George Mallory Tells You The Meaning Of Life via the Plaid Zebra:
What makes Mallory’s response so remarkable, is that he refused to compromise his beliefs despite the presence of perilous consequence. He had no conception of the impact his journey would have on capturing the imagination of a generation. He remained a ghost for 75 years and to this day, it is still unknown if he was truly the first to reach the summit of Everest over quarter of a century before the first recorded success.
Anyone who watches the NFL has no doubt seen what seems like thousands of commercials for the daily fantasy leagues. The State of New York has shut down FanDuel and DraftKings for their being illegal gambling as described by Fortune in DraftKings, FanDuel Go To War with Eric Schneiderman.
There has been a slew of bad news over the past month for the leading daily fantasy sports companies, but the latest may be the most significant blow so far. Late Tuesday, New York Attorney General Eric Schneiderman announced that after a month-long investigation, he has determined DraftKings and FanDuel to be to be in violation of the state’s gambling laws.
Further on in the article:
FanDuel was even stronger in its rebuttal, accusing the Attorney General of looking to promote himself. “This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love,” FanDuel said.
As a public service announcement we would remind investors that the ESPN College Basketball 24 Hour Tip Off starts later today. Waking up and watching live college basketball early in the morning before starting the day is always fun and feels like getting away with something.
For November 9th, 2015 to November 13th, 2015
As for the sectors of the S&P 500, seven outperformed the broad benchmark – Utilities, Materials, Industrials, Staples, Telecom, Healthcare, and Financials. The remaining three – Discretionary, Technology, and Energy – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 6.39% this week, with Utilities outperforming all, and Energy coming in last.
For November 9th, 2015 to November 13th, 2015
As measured by the S&P 500 sector indices, respective performances were: