Last week U.S. stocks had their first weekly decline in a month due to mortgage losses. Treasuries rose most since March on concerns on the subprime crisis as Standard & Poor’s downgraded 75 U.S. collateralized debt obligations [CDOs] made up of subprime mortgages. No wonder that Financial stocks tumbled and the Chicago Board Options Exchange SPX Volatility Index, or VIX, jumped 11%. During the week the Russell 2000 led the way with a -2.3% loss followed by the S&P 500 -1.2%, the Nasdaq -0.7%, and the Dow -0.4%.
This week’s top performing sectors on a relative basis were Technology and Industrials with a gain of 1.45% and 1.33% respectively. The poor sector performers were Financials with a loss of 2.50% and Health Care with a decline of 1.06%. Additionally, mid cap and small cap value stocks lost 0.25% and 0.65% against growth stocks.
The chart of the normalized ratio of the Financial SPDR (NYSEARCA:XLF) reveals that the Financials Sector is currently in a free fall whereas the Industrials Sector (NYSEARCA:XLI) and the Technology Sector (NYSEARCA:XLK) are in a solid uptrend even though they are a little bit overbought on a relative basis. The shaded areas represent two standard deviations above and below the SPDR’s 50-day moving average.