SPY climbed above $200 in the past week, a positive sign for the short-term market. Shares spent most of 2015 between $210 and $200 per share and it may take time for the index to traverse this range before testing the all-time high.
IWM is hovering near $107. A clean upside break would require a rally of almost 20 percent to challenge its highs.
Utilities carried SDY to an all-time high. Dividend-paying sectors, such as consumer staples are also performing well.
On Tuesday, shares of Valeant Pharmaceuticals (VRX) plunged 50 percent on poor guidance and a delayed financial statement filing which could trigger a bond default. VRX has $30 billion in long-term debt, far exceeding the credit pressure of most biotech firms. While VRX is not a holding in any of the above funds, its losses sparked selling in some of the weaker biotech firms. These sectors have lagged the broader market to this point, but they are likely to lead the next phase of the rally once they close the gap.
All three major central banks will have made their policy statements. The response thus far to the European Central Bank's decision to increase asset purchases and cut interest rates to negative 0.40 percent has been positive for equities. Last week, stocks and the euro initially plunged on the ECB policy statement, only to reverse strongly over the course of the next day.
All the current trends remain intact, with emerging market currencies, resource currencies and the yen looking to move higher, while the dollar and euro are in trading ranges.
Oil prices continued to gain ground in the past week, but the ascent has slowed before reaching the psychologically important $40 level. OPEC continues to discuss production freezes, but Iranian refusals to comply have stalled any real progress. A number of U.S. shale producers say they will ramp up production above $40 a barrel, but yesterday The Wall Street Journal reported many shale producers can't increase production owing to large layoffs and investment cuts. Oil production is beginning to fall slightly, but inventories are still rising.
Energy related equities also enjoyed a rally in recent weeks and that move is consolidating. XLE is up about 20 percent from its January lows. FCG enjoyed a far larger rally in percentage terms.
Steel, copper and coal funds are at an increased risk for a pullback. These funds are heavily influenced by China's economy and January and February data shows no end to the slowdown. Shares of coal producer Peabody Energy (NYSE:BTU) fell more than 40 percent on Wednesday after the firm warned of bankruptcy. The chart below indicates the stock traded for more than $1300 per share (adjusted by reverse splits) at the peak in mid-2008.
SPDR Utilities (XLU)
SPDR Pharmaceuticals (XPH)
SPDR Materials (XLB)
SPDR Consumer Staples (XLP)
SPDR Consumer Discretionary (XLY)
SPDR Healthcare (XLV)
SPDR Technology (XLK)
SPDR Financials (XLF)
SPDR Retail (XRT)
All but one major equity sector rallied last week and no sector lost ground. Consumer discretionary and financials led, with the latter benefiting from rising interest rate expectations. Consumer shares were unfazed by weaker-than-expected retail sales in February.
Utilities and consumer staples pushed to new all-time highs with those gains, while consumer discretionary fund XLY and technology fund XLK are closing in on their all-time highs.
Interest rates also continued to rally over the past week, though not to any detriment for HYG or LQD. Investors have grown more optimistic and are now more interested in the attractive yields available in investment grade bonds and high-yield debt. There's still room for gains if credit risk continues to ease, even if interest rates rise.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.