S&P Sectors This Week

The markets went out with a bang on Friday. A good bang, though, and perhaps even a puzzling bang that gave some investors hope. On the other hand, Friday's jobs report revealed some economic weakness that continues to trouble the financial situation. The volatile Dow Jones Industrial Average gained 1.23% after a 200 point loss upon opening with news of a weaker gain in the labor market. Those numbers, an addition of 142,000 new jobs in September, failed to meet the expectations of various economists who projected a gain of around 200,000. The Global Dow saw the same gains at 1.22% with the increased probability of low to zero interest rates. Some particularly bearish analysts are citing the possibility of  NIRP or Negative Interest Rate Policy. While I do not see this happening, the significant gains seen on Friday show that Wall Street is willing to bet on another few months of easy money conditions. Asian and European markets also gained with the Stoxx 600 up 0.47% and the Shanghai Composite and Nikkei up 0.23% and 0.02% respectively. Global markets not only responded to the increased likelihood of U.S. rate delay but also to economic indicators hinting at a slowdown of weakness forming a bottoming out pattern. Friday's gains erased four days of losses for the Dow with the week ending at positive 0.97%. The S&P 500  finished the week with gains measuring 1.04% as well. Looking back, on paper the week would seem bullish for sure, but the earlier volatility would have said otherwise. VIX dropped over 11% this week as prices seemed to move will less volatility and more significance. Whipsaw days were very rare with most of the trading done in one direction. The energy sector grew as well this week, posting gains of 2.81%, even after being evaluated as the worst sector in quarter three. Those positive movements can be attributed to the buying in the equities market coupled with gains in WTI and Brent crude oil benchmark prices, After seeing large declines in the U.S. rig count, futures contracts shot up 2.06% on the Chicago Mercantile Exchange. Supply issues are once again pushed into the foreground of investors' minds as demand worries start to stabilize. Energy stocks lead the sectors on Friday, in fact, as the others were painted in green as well. OIL and other ETFs rose marginally (about 1%) after the 2.06% gain. On top of that, volume was 200,000 higher when a Thursday session closed lower. ETF gamblers may be more cognizant of demand statistics than those looking at the companies in the energy sector. Overall, Friday signaled traders that bulls might be able to gain some headway this quarter. Comparing the sectors' first week of trading might foreshadow a performance we'd like to see later this quarter.

Charted above are the S&P Sector ETFs and their performance against the normal S&P 500 this week. The energy sector, as seen earlier, performed exceptionally well due to the major Friday gains. Material and cyclical gains were also noticeable this week with the hope of a commodity recovery after a quarter of bearish sentiment. Those are the general similarities between the gainers (except for healthcare which experienced some buying after considerable losses from the past quarter) which beat the S&P average for the week. The other sectors saw losses this week after more poor economic data was introduced (jobs and manufacturing). The industrials and consumer staples reacted to manufacturing and export data, and financials were hurt by more convoluted Fed policy and an increase in corporate debt. Overall, the sectors balanced each other out to cancel out significant S&P 500 movement. Compared to last quarter's performance, the first week deviated from the strong bearish trend with hopes to rotate into a stronger market setting. Concerning predictions, this data may contain too many traces of volatility to support speculation, but I would bet on the energy sector, as well as commodities overall, to rebound from last quarter and continue to add onto gains from Friday. The rest of the sectors should look forward to a Chinese recovery, earnings reports, and more Fed meetings to gauge their potential during these last three months.