Quickly Oversold

The cash S&P 500 index ended the week at 4369, down from the prior Friday’s closing price of 4,464. The decline in the index for August of -4.8% came after an above average +3.1% gain for July.   Call it a “Summer stall”.  The S&P 500 is now up +14% year to date.  Minutes released last week from the latest Federal Open Market Committee meeting indicated most committee members saw “significant upside risks” to inflation, which could prompt the central bank to further raise its benchmark lending rate.  Recall this is the same group who did NOT see inflation ticking higher in 2021.

The Monday morning session is US futures is up and Asia down.  U.S. futures are pointing 0.3%-to-0.5% higher following last week’s sell-off with the S&P 500 falling -2.1%% on the week due to interest rate jitters and China’s economic issues.  The 10-year Treasury yield hit a 16-year closing high above 4.3% last week. Investors will eye Nvidia’s earnings release on Wednesday as the company almost single-handedly sparked an AI-led rush into stocks after its last report trounced expectations.

Along with higher long-term interest rates last week, all industry sectors declined. The worst performing sector leading declines with a -4.1% drop was consumer discretionary, followed by a -3.2% slide in real estate and a -2.8% loss in financials. The smallest decline was posted by the technology sector, which slipped -0.8%.

Tesla shares (TSLA) led the consumer discretionary sector’s drop, falling -11% on the week as reports said the electric vehicle maker reduced the prices once again for its premium Model S and Model X vehicles in China.  This was its second price cut in the country last week. The company also launched two cheaper versions of its Model S sedan and Model X sports utility vehicle in the US.

In real estate, shares of Boston Properties (BXP) fell -7.1% as Argus downgraded its investment rating on the workplace manager’s stock to hold from buy.  Kimco Realty (KIM) fell -6.3% as Goldman Sachs downgraded its investment rating on the shopping center operator’s stock to neutral from buy.

Among the decliners in the financial sector, shares of credit card company Discover Financial Services (DFS) tanked -9.9%. Morgan Stanley cut its price target on the digital banking and payment services company’s stock to $100 per share from $107.

This week, earnings reports are expected from Lowe’s (LOW), Medtronic (MDT), NVIDIA (NVDA) and Intuit (INTU).

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weekly returns 8/21/2023