The S&P 500’s big jump amid last week’s “epic rallies” for stocks and bonds was partly due to interest rate-sensitive sectors extending the breadth of the index’s gains and putting it on track for a year-end rally, it said Yardeni Research.
“All 11 sectors gained ground last week, many having their best week in nearly a year,” Yardeni analysts led by president and chief investment strategist Ed Yardeni said in a note Monday. “We believe the stock market correction is over and the S&P 500 is back on track to end the year at 4,600.”
U.S. stocks were down on Monday afternoon, with the S&P 500 index SPX slipping slightly to around 4,353 after posting its biggest weekly percentage gain since November 2022 last week. After a group of seven so-called Big Tech stocks fueled the S&P 500’s rally well into 2023, investors are watching for signs that the breadth of the market gauge is widening as it rises.
“The plunge in bond yields has pushed up the valuation metrics of technology stocks as well as more traditionally interest rate-sensitive stocks,” Yardeni analysts said of last week’s rally.
Real estate was the best-performing sector in the S&P 500 last week, rising 8.5%, while financials and consumer discretionary saw the second-biggest gains, according to the company’s release.
How the S&P 500 sectors performed last week
| S&P 500 sector | %Perfomance |
Property | 8.5 |
Finance | 7.4 |
Consumer discretion | 7.2 |
Information technology | 6.8 |
Communication Services | 6.5 |
Industry | 5.3 |
Utilities | 5.2 |
materials | 5.1 |
Healthcare | 3.5 |
Staple food | 3.2 |
energy | 2.3 |
Source: Note from Yardeni Research |
Read: Homebuilding ETFs rose sharply, outpacing the Dow’s big gains
The U.S. stock market’s sharp rise last week saw the S&P 500 SPX, Dow Jones Industrial Average DJIA and Nasdaq Composite COMP post a strong start to November after the indices fell for the past three consecutive months.
“From August to October, investors were unsettled by the rise in the 10-year US Treasury yield from 3.96% on July 31 to 5.00% a week ago,” Yardeni analysts said.
U.S. stock prices generally rose last week as Treasury yields fell, according to Dow Jones Market Data. The 10-year Treasury rate experienced its biggest weekly decline since March, reaching 4.557% on Friday based on levels as of 3 p.m. Eastern Time, according to Dow Jones Market Data.
Last week’s “epic” rally in the bond market sent the 10-year Treasury yield “down to a more comfortable range of 5.00%,” Yardeni analysts wrote. They said the move was “fueled by mildly optimistic economic news, which appears to have sparked a massive short-covering rally among bears and a buying panic among bulls.”
The 10-year Treasury yield BX:TMUBMUSD10Y was trading higher at around 4.65% at last check on Monday, according to FactSet data. Bond yields and prices move in opposite directions.
Meanwhile, “the stock market appears to be following the classic seasonal year-end weakness script in September and October, setting the stage for a Santa Claus rally,” analysts said.
See: Dow posts best week since October 2022 as stocks rise following soft jobs report
The S&P 500 gained 5.9% last week, with the index real estate XX:SP500.60, financials XX:SP500.40, consumer discretionary XX:SP500.25, technology XX:SP500.45 and communications services XX:SP500, 50 All sectors outperformed the broader index over the same period.
Big Tech in 2023
Meanwhile, the S&P 500 sectors that have performed best so far in 2023 are communications services, technology and consumer discretionary, each with huge double-digit gains.
Big Tech stocks, which include seven giant companies from all three of these sectors, are heavily weighted in the S&P 500 index.
The chip manufacturer Nvidia Corp. NVDA, +1.66% is posting by far the biggest gains among Big Tech stocks in 2023. Shares of the technology company, with a market valuation of more than $1 trillion, are up more than 208% so far this year in Monday afternoon trading, according to FactSet data.
The next biggest stock gains in 2023 in Big Tech come from Facebook parent Meta Platforms Inc. META, +0.38%, which has risen about 162%, followed by Tesla Inc. TSLA, -0. 31%, whose shares are up about 75%, and then Amazon.com Inc.’s AMZN, +0.82% up about 66%, according to FactSet data, at last check.
But real estate and financials, the two most important sectors of the S&P 500 in last week’s rally, remain in the red so far in 2023, with each sector falling as of Monday afternoon. In contrast, the S&P 500 is up more than 13% this year based on afternoon trading levels.