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BOTTOM LINE: Overall, last week's market performance was slightly negative considering the decline in energy prices, strong earnings reports and fall in long-term interest rates. Friday's reversal on good volume was a positive. The advance/decline fell, sector performance was mixed and volume was average on the week. Small-cap, Cyclical and Tech shares all underperformed as worries over slowing global growth increased. Commodity-related shares were especially hard hit on concerns over rising supply, slowing global demand and a firmer US dollar. Measures of investor anxiety were mixed on the week. However, the AAII % Bulls falling back below 30% is a big positive. Future inflation expectations continue to decline as is evidenced by another fall in long-term interest rates, weakening gold shares and strengthening utility stocks. As I have stated a number of times, investors should be more concerned with a return to deflation than inflation. Stagflation is highly unlikely. The average 30-year mortgage rate has now declined from 6.04% on April 1 to 5.78%. Homebuilders should continue to outperform during the second-half of the year as rates remain low, building costs decline, consumer sentiment improves and the labor market continues its modest improvement. Retail shares will likely come under increasing pressure over the coming weeks as unseasonably mild/wet weather and high energy prices result in earnings shortfalls. However, the second half of the year should be strong and I will look to acquire shares in these stocks on weakness.
*5-Day % Change