Streak comes to an end
Last week saw the S&P 500 and Nasdaq break their winning streaks. The S&P had gains for five straight weeks and the Nasdaq had done for eight weeks. There wasn’t a singular event that we could point at as the reason for the streaks to have ended, but there was a growing sense that the market was due for a pullback and investors may have been seeking to take profits after such a long run.
That being said, mega cap stocks were still relative outperformers with the losses more pronounced in stocks outside of the technology sector. This can be seen by the 2.7% loss in the Invesco S&P 500 Equal Weight ETF (RSP) versus the 1.4% loss for the market-cap weighted S&P 500. Highlighting this difference, is the 1.0% decline in the Vanguard Mega Cap Growth ETF (MGK).
The banks led the way lower with the SPDR S&P Bank ETF (KBE) falling 6.8% while the SPDR Regional Banking ETF (KRE) fell 8.1%. Weakness in the regional bank, contributed to the underperformance of the Russell 2000, down 2.9%. Besides the banks, the real estate (-4.0%), energy (-3.5%), and utilities (-2.6%) sectors saw notable declines. The only sector with a gain for the week was healthcare (+0.2%).
Fed Chair Jerome Powell testified before the House Financial Services Committee on last Wednesday. He told the Congress that there could be two more rate hikes by the Fed before the end of the year if the economy performs as expected. Powell continued his monetary policy testimony before the Senate Banking Committee on Thursday. There was noticeable consternation among the Senators regarding capital requirements for banks. That may have contributed to the selling pressure on the bank stocks.
Separately, several central banks announced increases in their policy rates, including the Bank of England (+50 bps to 5.00%), Norges Bank (+50 bps to 3.75%), Swiss National Bank (+25 bps to 1.75%), and Central Bank of Turkey (+650 bps to 15.0%). Those moves stoked concerns about inflation and the potential of these hikes impacting global growth.