Equities closed mixed across the major US indices. The Dow added 0.16% while the S&P 500 fell 0.32% and the Nasdaq Composite pulled back 0.85%. TSLA and NVDA gave back some of Friday’s big gains while CVX helped to boost energy shares higher.
At the sector level, XLE and XLB were strong performers as Crude continued its near-term rally with the WTI contract topping $78. The Bloomberg Commodities Index firmed with a close above 97. At a high level, the tape showed a familiar reversion pattern, as XLK and XLY were downside leaders on the day to the benefit of almost every other theme in the market whether Commodity adjacent, Value, Cyclical, Low Vol. When XLK and XLY are sold and Mag7 is sold, it has generally netted out to a binary dynamic.
Small Caps did a better job holding on to last week’s gains as the R2K dipped just 0.04%. Policy easing for the time being is seen to benefit the laggard areas of the equity market. After a strong 2 weeks from XLY, the laggard at present is the commodities adjacent segment of the equity market.
Yields on the 2yr and 10yr Treasuries were little changed at 3.92% and 3.81% respectively. Tuesday’s economic calendar features home price data as well as Consumer Confidence and the Richmond Fed Index. Earnings remain scarce ahead of a big day Wednesday highlighted by NVDA after the bell.
Eco Data Releases | Tuesday August 27th, 2024
S&P 500 Constituent Earnings Announcements by GICS Sector | Tuesday August 27th, 2024
No S&P 500 Constituents Report
Tactical Tuesday
While it is fair to say that our model hasn’t favored commodities adjacent sectors much over the past several months, we will prove our clear objectivity and dispassion by mentioning the XLB is on the cusp of some positive technical developments. As can be seen in the chart below, price has rallied into longer-term resistance at the 93 level with a break-out suggesting 10% upside into year end. Panel 2 highlights the relative performance trend which is a long-term negative but hitching higher in the near-term. There’s upside there even in the context of the longer downtrend channel. With the fairly violent rotations that have occurred over the summer, things may be setup for XLB and potentially XLE to catch salubrious effects from the Fed’s policy efforts.
Data sourced from FactSet Data Systems
