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December Sector Scopes Update & S&P/TSX Composite Index (TSX.I)

In this edition of Equity Leaders Weekly, we look at what the Sector Scopes are telling us about market sentiment and sector performance and also at recent action in the S&P/TSX Composite Index.

Please note that Equity Leaders Weekly will not be issued next week. It will return on Thursday January 4th. Until then, we wish everyone a happy and safe holiday season. The equity market rally of recent weeks accelerated to a crescendo last Friday following last week’s dovish read by investors on last week’s Fed meeting. With the US 10-year treasury note yield falling back under 4.00%, and other traded interest rates around the world dropping as European central banks went neutral and the Bank of Japan stayed dovish, equity markets around the world took off in a broad-based rally. So far this week trading has been a bit more mixed. Upward momentum slowed Monday and Tuesday then yesterday we started to see a correction. Overall, Resource exporting countries like Canada, Australia, Brazil and Mexico have been leading the charge with gains of 2.0% to 4.5%. Asia Pacific markets have been struggling, particularly Japan and Mainland China, with losses of 1.0%-2.0%. Gains, which heading into yesterday were widely distributed, have become a bit more mixed, part of which is due to yesterday’s correction and part of which is due to the higher bar set after last Wednesday’s Fed meeting. A day ago, nine of the eleven primary industry groups have posted gains of 5-7%, with Materials leading the charge with an 8.5% gain, and defensive Utilities trailing with a 2.5% gain. This morning, Nine of the Eleven groups are in the green with Materials and Energy be top performers with gains of near 3.0%. Utilities have dropped 3.0% over the last week, and Health Care has also had a small pullback.

Small caps continued to play catch up with the Russel 2000 climbing 7.1%, while the mega cap S&P 100 was flat over the last week.

Most of the recent gains came between the Fed decision and forecasts Wednesday afternoon and Quadruple Witching Hour last Friday afternoon. With many investors starting to head out on vacation, upward momentum has slowed a bit since Monday. Some price oscillators and investor sentiment indicators have started to suggest the rapid gains of the last six weeks have pushed equities into short-term overbought territory and perhaps due for a pause to rest over the holiday season. FedEx fell 12.0% yesterday after reporting disappointing sales/earnings that came in well below street expectations. Nike reports after the close today. No more earnings of note are expected until mid January. It may be interesting to see if any companies use the quiet holiday season to try and sneak through profit warnings. Tomorrow’s US Core PCE inflation report pretty much wraps up the economic calendar for this year. Next week the calendar is light until the Chicago PMI report next Friday. The new year kicks off with a flurry of economic numbers with Manufacturing PMI reports, Service PMI reports, US ADP payrolls, US nonfarm payrolls, Canada jobs and North American wage inflation numbers all scheduled for January 2nd to 5th.

Sector Scopes Update December 2023

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