STOCKS HAD A STRONG WEEK WHILE THE DOLLAR DROPPED -- TECHNOLOGY AND HEALTHCARE WERE THE WEEK'S TOP GAINERS -- BUT ALL SECTORS GAINED GROUND
GLOBAL STOCKS HAD A STRONG WEEK... Stocks had one of the strongest weeks in months as election results appear to be leaning in the direction of a more divided government. That might reduce chances for higher taxes and more regulations. Major stock indexes ended the week within striking distance of their September highs. Foreign stocks also had a strong week with emerging markets hitting the highest level since early 2018. A falling dollar had something to do with that. The U.S. Dollar Index fell 1.9% on the week and is threatening its 2020 low. The weaker dollar also boosted commodity prices, including precious metals which had a strong week. The yield on the 10-Year Treasury Bond fell 4 basis points to .82%. The TNX had rallied to a five-month high on Tuesday before dropping sharply in Wednesday's trading. Bond yields, however, rebounded on Friday. As a result, Treasury bonds saw modest gains on the week. Investment grade and high yield corporate bonds did much better as stock prices rose. Two of the week's more notable moves were the rally in stocks and drop in the dollar.
DOLLAR DROPS WHILE STOCKS GAIN... Chart 1 shows the S&P 500 ending the week just shy of its recent highs in what appears to a consolidation pattern. While Chart 2 shows the U.S. Dollar Index threatening its early September low. My Friday message showed once again that stocks and the dollar have been trending in opposite directions since the spring. So while stocks ended the week near their previous highs, the dollar is threatening its 2020 low. Rising global stocks reduce the appeal of the safe haven dollar. The falling dollar boosted gold and silver prices (along with other commodities) as well as emerging markets which achieved a bullish breakout. The broadness of the week's stock rally lifted all eleven market sectors. With technology and healthcare in the lead.
WEEKLY SECTOR REVIEW...The week's rally was broad based with all eleven sectors in the black as shown in Chart 3. The chart also shows the top two sectors being technology and healthcare. Technology showed new leadership after lagging behind over the last two months. The prospect of divided government (and a drop in bond yields) probably had something to do with that. Semiconducters led the tech sector higher and hit a new record in the process. The Healthcare SPDR also hit a new record as did an index of health insurers which were its strongest group. Expectations for less regulation probably helped that group. Two other sector leaders were communications (led higher by Internet stocks) and materials which hit a new record. The Materials SPDR was led higher by stocks tied to aluminum, commodity chemicals, copper, and gold. A weaker dollar had a lot to do with that upside breakout. Economically-sensitive industrials and cyclicals also had a relatively strong week. Financials were held back by the drop in bond yields, but still gained on the week. Defensive sectors like staples, utilities, and real estate lagged behind. Energy was the week's smallest sector gainer. Although crude oil gained on the week, its price dropped on Thursday and Friday. It remains to be seen if the final election results support the past week's optimistic mood for stocks. Chart 4 shows the week's positive sector rankings in a more visual format compared to the S&P 500.
SILVER MINERS TURN UP... My Thursday message showed an index of gold miners turning up this week (with the commodity). Shares tied to silver did even better (as did that commodity). Chart 5 shows the Global X Silver Miners ETF (SIL) rising above its October peak to turn is short-term trend back up again. Gold and silver remain in long-term uptrends. Silver and its miners usually rise along with the price of gold but at a faster pace.
