Note on Yesterday’s Market

I wanted to touch on yesterday’s market action because it was so unusual. The S&P 500 gained 0.50% on Wednesday but there was a very wide divergence within the market.

The S&P 500 Value stocks gained 1.02% while the Growth stocks gained just 0.01%. The other divergence can be seen among the cyclicals. The Energy stocks in the S&P 500 gained 3.96% while the Materials stocks were up 3.33%. That’s a big gap between them and everyone else.

This is an important point that I stress to investors: different categories of stocks move in different ways. The cyclicals represent one node of the market. Mostly these are Energy and Materials stocks. Industrials are their closest cousins. Not surprisingly, the Industrials did fairly well today with a 1.51% gain.

Here is the matrix I’ve used to describe how the market generally moves. Yesterday was a classic Quadrant I day.

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Long-term yields moved slightly higher on Wednesday while short-term yields were largely unchanged. I should add that the Energy and Materials stocks did well yesterday after doing very poorly for the last several months. The Industrials have been underperforming for about 20 months.

Posted by on February 4th, 2016 at 2:30 am


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