To The Moon

Market started second quarter of 2024 yesterday, we have a strong start to 2024 for many stocks. But we saw the session ended mostly in the negative(red) with declining issues outnumbering advancing ones by approximately 2:1 ratio in both NYSE and NASDAQ.

Russell 2000 experienced a 1.0% drop, underperforming compared to last week. We also saw S&P 500 falling 0.2% and Dow Jones Industrial Average declining 0.6%.

Only Nasdaq Composite managed to gather a small gain of 0.1%, the gain is supported by some mega-cap stocks and also the strength in the semiconductor sector which shows a positive 1.09% and also $Invesco PHLX Semiconductor ETF(SOXQ)$ rising 1.2%.

Impact Coming From Interest Rate

The downward pressure we saw on stocks actually came from a significant increase in market rates. we saw the yield on the 10-year note surged to 4.309%, and we also saw the 2-year note yield rose to 4.699%.

This rise is due to release of economic data that have market expectations ponder and challenge regarding the rate cuts by the FOMC. Moreover, we saw 01 April February Personal Spending and Income report, plus the ISM Manufacturing data at 10pm last night, all these highlighted that inflation is persistent and we have stronger-than-expected manufacturing activity.

8 Out Of 11 S&P 500 sectors in The Red

We saw eight out of 11 S&P 500 sectors closing the day session with losses. The real estate sector which is sensitive to rate changes suffered the hardest hit with a 1.8% drop.

But we saw the communication services sector providing a gain of 1.5%, this is supported by the $Meta Platforms, Inc.(META)$ and $Alphabet(GOOGL)$ advancing in their stock.

We also saw energy sector doing well, rising 0.8%. The higher commodity prices have Chevron (CVX) and Exxon Mobil (XOM) providing the positive gains.

WTI crude oil futures went up to $83.94 per barrel with a 0.8% increase and natural gas futures saw a significant jump of 5.1% to $1.85/mmbtu.

What Economic Data Tell Us So Far

The S&P Global US Manufacturing Index dropped slightly to 51.9 in March from 52.2. Meanwhile, the March ISM Manufacturing Index rose to 50.3%.

This indicate that there is expansion in the manufacturing sector for the first time since September 2022, this shall support the Federal Reserve's cautious stance on rate cuts, reflecting ongoing business activity expansion, persistent high prices, and stable employment conditions.

February's total construction spending decreased by 0.3%, with a notable decline in nonresidential spending in both private and public sectors, despite a slight increase in new single-family construction.

This would mean that we could still see mixed market movements with more sector shifts.

How Can We Trade Amid Sector Shifts?

If we look at how things have moved on the first day of second quarter, we could look at the following ETF funds.

To take advantage of the performance of the communication services, we could look at investing into $Communication Services Select Sector SPDR Fund(XLC)$ We have the names like Meta and Alphabet which have helped to push the sector up.

So it is important that we find fund who has a good holdings that are doing well.

Another ETF would be the energy sector ETF $Energy Select Sector SPDR Fund(XLE)$ . We have 2 of the best performer, Exxon Mobil and Chevron Corporation.

We are also seeing an upside move in this fund on a one month chart, I believe it is going to continue its first quarter performance into this second quarter.

Summary

Market analysts have observed a mixed performance across major averages, with the Dow (DJI) experiencing a decline, while the Nasdaq Composite managed a slight gain.

Sector-wise, Communication Services and Energy sectors outperformed, contrasting with the downturns seen in Real Estate and Health Care. Additionally, Treasury yields saw an increase, indicating a dynamic shift in investor sentiment as the new quarter begins.

Appreciate if you could share your thoughts in the comment section whether you think we could work our strategy to benefit from the sector shifts because of mixed market movements?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.