The media crowd likes to say a 20% rally ushers in a new bull market. But while the S&P 500 is now up 20% from its October 2022 lows, we're not so sure a new bull market is upon us.
Make no mistake, the internals of the market represent a quality rally that has been underway for the past couple weeks. Solid breadth, a decline in volatility, a drop in put/call ratios and strong volume with a price breakout are what encourages us about the market's future.
However, all major indexes are well below their all-time highs. To us, exceeding those levels (4,800 on the S&P 500, for example) would be the sign of a new bull market. It will take some time to get back to those levels, and economic uncertainty will be a challenge to reaching them. Some recent data show a slowdown is happening. Yet after a rough 2022, what else but to look at the glass as half full?
Interest rates are moving a bit higher here on Friday morning after a sudden drop in yields yesterday that stoked a strong tech-driven rally. We could attribute the rise in bond prices Thursday to a pretty strong Treasury auction. Meanwhile, gold futures are modestly higher as the yellow metal pushes once again toward $2,000 an ounce.
Overnight we learned Italian industrial production fell sharply in April. The country is part of the eurozone, which just went into a recession. The European Union is trying to shake off poor economic data, but with elevated unemployment and layoffs coming (as stated by several companies) it will be a challenge to turn this recession around quickly. Euro markets are modestly lower to flat today.
The cyber criminals are at it again. This time, they are hitting the artificial intelligence software and chip business. We learned Nvidia ( NVDA
) had a leak of data due to its software being tricked by some cyber hackers. The cyber sleuths from CyberArk ( CYBR
) and others will be put to work to fix this data privacy problem, likely to benefit our holding of the First Trust Nasdaq CyberSecurity ETF ( CIBR
More big wins for this defense company in the Action Alerts PLUS portfolio. Announced last night was a $2 billion Air Defense Package to assist Ukraine in its battle with Russia; the package will include Lockheed Martin ( LMT
) missile systems. The company makes the very popular and effective Patriot missile. An air defense system has been vital to Ukraine to battle against air- and ground-launched cruise missiles from Russia.
Energy May Be on the Rise
Global demand for oil and gas continues to rise, and with the recently announced cuts in production by OPEC+ we could see oil prices start to move higher. That would benefit our Energy Select Sector SPDR Fund ( XLE
) shares. An executive from Pioneer Natural Resources ( PXD
) said the US oil industry's output "has been capped by higher labor and materials costs that have squeezed profit margins" amid investor demands to limit spending. Crude oil is up slightly this morning.