2018-04-02 Market Commentary from MundaneAway, Inc. on Vimeo.
While the Major Markets closed the holiday shortened week higher, they didn’t seem to find much relief as volatility was still elevated from day to day. Monday began the week with the largest daily gains since the flash-crash week of August 2015. The exuberance was short lived, however, as the market pulled back again Tuesday before finding a calm Wednesday and closing out the first quarter with a gain on Thursday.
In the end, the S&P 500 saw the first quarterly loss in 9 quarters.
The underlying sectors closed the week higher across the board. However, the Information Technology sector, which ended in the middle of the pact, had a rough go last week as the headlines seemed to come from all fronts.
On Monday, Arizona’s Governor Doug Ducey suspended Uber’s license to operate self-driving cars following the first ever reported pedestrian fatality due to an autonomous vehicle.
Similarly, Tesla shares fell last week on the report that the autopilot had been engaged during the fatal crash of a car near Mountain View, California.
https://www.sfgate.com/bayarea/article/Tesla-incinerates-after-violent-3-car-crash-on-12777162.php
While auto-related fatalities occur daily nationwide, the involvement of autonomous vehicles is new, giving market participants a pause on these stocks.
In other areas of the tech sector, the fallout for Facebook continued as the social media company rolled out new tools to help its over 2 billion monthly users control their security settings.
https://newsroom.fb.com/news/2018/03/privacy-shortcuts/
Despite these positive steps forward, Buzzfeed reported on a memo from 2016 which detailed the company’s questionable pursuit of data at the cost of user privacy and safety.
https://www.buzzfeed.com/ryanmac/growth-at-any-cost-top-facebook-executive-defended-data?utm_term=.hby0oPJBkY#.qj5lnwLPzA
Consequently, the news stories surrounding the challenges for some of the largest disruptors in Silicon Valley accounted for a significant portion of the underperformance last week in the NASDAQ.
Yet, when looking at year to date performance, the IT sector was one of only two sectors to show gains for the first quarter. Furthermore, the Tech centric NASDAQ was one of two major markets to also show gains in the first quarter. The overall direction of this segment of the market is important as it reflects the largest amount of capitalization compared to the other sectors within the S&P 500.
When breaking about the style boxes, we see that the growth segments of the style box contained the only bit of green, when looking at capitalization, with the largest gains found in the small cap index.
As for the bond market, the 10-year treasury ended the week at 2.74% while the 2-year closed at 2.26%. As a result, the 2s10s spread fell to 48 bps, further flattening the yield curve and showing the lowest reading since