AdvisorShares Weekly Market Review – Week Ending 10/03/2014
Highlights of the Prior Week
The S&P 500 was cruisin for a four day bruisin before the jobs report salvaged the week. Going into the jobs data the benchmark was down 1.86% through Thursday but thanks to the rally Friday the decline on the week was pared back to 0.75%.
In last week’s Market Update we noted that expectations called for the headline unemployment rate printing at 6.1% with 213,000 new jobs added. A firm new to us named sisr-research (that’s not a slight, they don’t capitalize their name) sent in a forecast of 5.9% and of course nailed it. There were 248,000 jobs created in September but the labor force participation rate dipped a tick to 62.7%. Also troubling in the report is the lack of wage growth. The threat posed by lack of wage growth is weaker future demand which of course would be a threat to GDP growth.
In addition to the decline for the S&P 500, the other US benchmarks also fell on the week; the Dow 30 down 60 basis points, the Nasdaq down 37 basis points and the Russell 2000 continues to underperform as it fell 1.3%.
Equity uncertainty contributed to the yield on the Ten Year US Treasury Note falling nine basis points to 2.44%. The CBOE Volatility Index bounced around with the equity indexes but netted very little movement.
Commodities were roughed up last week. Gold fell 2.30% with much of the decline coming Friday after the generally positive jobs data. This reaction makes sense for being generally less inflationary. West Texas Crude Oil fell 3.49% and should be a little more concerning. Historically changes in demand for oil have been tied to expectations of economic activity; a thriving economy consumes more oil. The new dynamic in this rule of thumb is the supply being created in places like the Bakken and Permian.
Of the seven major foreign equity markets we follow only the Shanghai Composite was able to muster a decent gain, rising 1.47%. Australia added a handful of basis points but the others were all lower led by Germany which fell 6.16%. The Hang Seng was also punished with a 5.04% decline.
The trend of dollar strength continued last week with the greenback gaining on all three of the majors. If the dollar is too strong it hurts earnings of US companies selling goods overseas.
Speaking of earning the season for third quarter reporting is upon us when Alcoa unofficially kicks it off after the bell on Wednesday. Barron’s cited estimates that S&P 500 companies are expected to report earnings growth of 4.6% on revenue growth of 3.6%.
There was big news from the tech world over the weekend with many news outlets reporting that Hewlett Packard will split into two different companies; PCs & printers separating from the rest of the company which is primarily corporate hardware (enterprise). The Wall Street Journal reports that Meg Whitman is slated to be the Chair of the PC & printer business and CEO of the enterprise business.
ETF News & Data
Inflows and outflows were a reflection of market activity last week. Money left equities and headed to fixed income. The SPDR S&P 500 lead the way with a $7.7 billion exodus almost completely reversing last week’s inflow. Equity outflows did not discriminate with funds tracking the NASDAQ, emerging markets, small-caps and even mid-caps rounding out the top ten.
Eight of the top funds on the inflow leader board were bond funds mostly going to different maturities in the treasury market but two high yield bond index funds also made the cut.
Much is being made about what will or will not happen with PIMCO’s AUM. While it is too early to draw any conclusions it big bond ETF recorded $662 million in outflows.
There were seven new funds launched last week with an unusually wide array ranging emerging markets real estate, managed futures, extremely narrowly focused technology funds, factor funds and an actively managed fund targeting MLPs.
Singapore Airlines now offers a “Suite Class” for long haul flights. The suites are like hotel rooms and author Derek Lo shared his experience flying from Singapore to New York City (he used all of his frequent flyer miles to pay for the flight) in What It’s Like To Fly The $23,000 Suite Class. The pictures are incredible.
The MLB playoffs are of course underway and the games, even the blowouts in Baltimore have been exciting with the Royals surprising everyone by sweeping the Angels, unhittable Dodgers’ ace Clayton Kershaw getting shelled and the Giants needing 18 innings on Saturday to beat the Nationals.
Roger Nusbaum, AdvisorShares ETF Strategist
Source: Google Finance, Yahoo Finance, Wall Street Journal, Bloomberg, Barrons, ETF.com, XTF.com, Yahoo.com
Weekly ETF Flows
For September 29, 2014 to October 3, 2014
S&P Sector Analysis
As for the sectors of the S&P 500, seven outperformed the broad benchmark – Utilities, Staples, Telecom, Healthcare, Financials, Technology and Discretionary. The remaining three – Industrials, Energy and Materials – each underperformed. The dispersion between the top-performing and bottom-performing sectors was roughly 5.61% this week, with Utilities outperforming all, and Materials coming in last.
For September 29, 2014 to October 3, 2014
Sector performances, as measured by the S&P 500 sector indices were: