Energy, Materials Sectors On the Rise

U.S. stocks climbed for a third straight week, sending the S&P 500 Index and Dow Jones Industrial Average to record highs, which was mainly driven by the Energy and Materials Sector. As retail sales in June took their steepest drop in two years, which was steeper than the 0.3% anticipated by economists, stocks from the Consumer Cyclicals Sector got hit last week. And the ongoing subprime mortgage crisis caused Financial stocks to retreat another week. During the last week the Dow climbed 2.2%, followed by the Nasdaq with 1.5%, and the S&P 500 added 1.4%. However, the Russell 2000 was lagging behind with a gain of only 0.4%.

The week’s top performing sectors on a relative basis were last weeks best performing sectors Energy and Materials with a gain of 2.12% and 1.88% respectively. The poor sector performers were Consumer Cyclicals with a loss of 1.50% and Financials with a decline of 1.21%. Additionally, large cap stocks gained 0.20% and 0.39% against mid cap and small cap stocks.

The chart of the normalized ratio of the Consumer Cyclicals SPDR (XLY) reveals that the Consumer Cyclicals Sector broke its short-term support line of the recent trading range to the downside. However, the Energy Sector (XLE) is still at the upper line of its steep uptrending trading channel and seems to be extended as energy stocks have been rising faster than the price of Crude Oil in the recent months. The Materials Sector (XLB) is currently in the middle of its uptrending trading channel after managing its breakout last week. The shaded areas represent two standard deviations above and below the SPDR’s 50-day moving average.

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