AdvisorShares Weekly Market Review – Week Ending 9/5/2014
Highlights of the Prior Week
As is always the case in the first week of the month, the big story was the jobs report. Jobs created came in at 142,000 well below the estimated 220,000. The headline unemployment rate down ticked to 6.1% and the labor force participation rate dropped a tick to 62.8% (Reuters’ coverage of the report indicated that before the financial crisis the participation rate was 66.0%).
Domestic equities took the weak report as a positive erasing pre-market declines to close up on the day with the logic being that weak data delays when the Federal Reserve Bank will raise its interest rates.
A related and coincident theme that made the rounds on Friday (covered by the WSJ and Yahoo Finance) is the shockingly high number of freelance workers in the US economy. According to a survey by the Freelancers Union “53 million Americans, or 34% of the workforce are freelancers.”
They define freelancers as being independent contractors, moonlighters (people with a second job), diversified workers (people who combine traditional and freelance), temporary workers and freelance business owners. This growing trend reflects an evolution of the American workforce but with multiple possible conclusions. On the plus side of the argument more people are able to enjoy entrepreneurial flexibility in their work weeks perhaps spurred on by the utility of the internet and the negative read is that the events of the last 15 years have displaced many workers leaving them to scramble to earn an income without company benefits. The reality is the both conclusions co-exist.
There was also big news in Euroland as the European Central Bank announced that it had cut rates to 0.05% and that in October it will commence the purchase of asset backed securities; their version of quantitative easing or as Barron’s put it Whatever It Takes 2 (WIT2) which of course is a nod to Mario Draghi’s famous quote in 2012. This came as a surprise to markets (when was the last time the central bank surprised anyone?) and sent the euro down more than two cents against the dollar which is a big move for the currency market.
Yields in Europe ticked slightly higher on the week despite the news; the German bund yield inched up to 0.93% from 0.87% last week, the French Oat yielded 1.26%, yields for the Italian ten year fell 19 basis points on the week to 2.25% (Italy being one of the weaker Euro members should be a big beneficiary of the WIT2) and in Spain, which also stands to benefit, yields went down to 2.04%.
For the week the Dow Jones Industrial Average was up 25 basis points, the S&P 500 up 24 basis points and the NASDAQ was flat for the holiday shortened week. For those keeping track of the large cap/small cap dispersion for 2014, the Russell 2000 was down 35 basis points. The CBOE Volatility Index (VIX) was up slightly on the week to 12.09 while gold fell 1.56% and the yield on US Ten Year Treasury Note was up 13 basis points to 2.46%. That’s right US ten year paper yields more than Italy and Spain.
On Friday markets received some long awaited detail on the IPO for Chinese e-commerce company Alibaba. It is scheduled to price on September 17th to then start trading on September 18th. Based on the current price talk the company will bring in approximately $24 billion and have a market cap of $155 billion. We will be curious to see if this IPO will be a green light for equity markets to continue rallying or represent a metaphorical bell ringing.
ETF News & Data
For the last few weeks fund flows have not told much of a story and this continued as one S&P 500 ETF was leader in creations at $1.3 billion while a competing S&P 500 ETF was leader for outflows at $1.1 billion.
The only new ETF last week was an index fund tracking mortgage backed securities from FlexShares.
The New Republic published an article by a journalist previously stationed in Turkey but who covered Syria, Afghanistan and other countries in the area. The article covered a fair bit of ground including a riveting account of his having been kidnapped in Syria but fortunately held for only a couple of hours.
As a bonus, a series of photographs Tweeted from the International Space Station and put up by the Telegraph.
Everything you need to know about sports this weekend can be summed up in a quote that ESPN attributed to Darius Rucker aka Hootie;
There’s two times of year for me: Football season, and waiting for football season.
The Cincinnati Bengals cut defensive tackle Devon Still just before the season started. Still, by his own admission, was unable to give the focus needed to make an NFL team because of his daughter’s cancer diagnosis last spring. Apparently still is well liked in the organization and the team believes that he would have made the team were it not for his daughter’s diagnosis so they signed Still to the practice squad. The significance is that Still is still a part of the organization, will be paid $6300 per week and will continue to get health insurance for his family.
Roger Nusbaum, AdvisorShares ETF Strategist
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, ESPN, New Republic, Reuters, The Telegraph, Fox Sports
Weekly ETF Flows
For September 1, 2014 to September 5, 2014
Shares outstanding include totals as of current day NAV.
S&P Sector Analysis
As for the sectors of the S&P 500, seven outperformed the broad benchmark – Staples, Utilities, Discretionary, Industrials, Healthcare, Financials and Telecom. The remaining three – Materials, Technology and Energy – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 2.44% this week, with Staples outperforming all, and Energy coming in last.
For September 1, 2014 to September 5, 2014
Sector performances, as measured by the S&P 500 sector indices were: