Last week saw a surprisingly strong rally as the stock market was driven higher by a sharp drop in interest rates. The S&P 500 gained 5.9% and the Nasdaq gained 6.6%. The rally brought the S&P 500 back above both its 200-day and 50-day moving averages. Meanwhile, the US 10-yr Treasury yield declined 31 basis points this week to 4.51% and the 2-yr yield fell 17 basis points this week to 4.86%.
An important contributor to the decline in rates was the Fed. The Fed voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50% and Fed Chair Jerome Powell’s press conference was deemed to be less hawkish than what was expected. Mr. Powell noted that the Fed has come very far with its rate-hike cycle and that policy decisions have gotten more two-sided.
The rate-sensitive real estate sector was the best performer, up 8.6%, followed by the financial (+7.4%), consumer discretionary (+7.2%), and information technology (+6.8%) sectors. The “worst” performing sector was energy, which still climbed 2.3% this week. Just about everything participated in the rally. The Invesco S&P 500 Equal Weight ETF (RSP) rose 5.9%, the Vanguard Mega Cap Growth ETF (MGK) rose 6.6%, and the Russell 2000 Value Index rose 7.6%.
There were many quarterly reports this last week headlined by Apple (AAPL). The numbers for Apple from the September quarter were positive with solid iPhone sales leading to a nice EPS beat and in-line revenue. However, on the conference call, Apple said it expects December quarter revenues to be flat vs last year, which would imply weaker than expected iPhone sales for the important holiday season.