Where is US equity market standing at?

Mar-20,2022 | VS partners

By the end of the week, majority of stocks stood below longer period moving average. The steam from last Tuesday’s rebound dissipated as the market came to a weekly close. The Tuesday rally overall bumped about half of the US equity stocks back to their 10-day and 20-day moving average, with those on Nasdaq leading the pack. However, by the end of Friday, only around 20% of the stocks remained above their 10-day moving average, while the majority of them stand below the longer-period moving average line.

Few stocks are under oversold territory as of Feb 18. The rebound earlier in the week left less than 2% of stocks in the oversold territory, and by the end of the week, there were less than 4-7% of them.

Table 1: US Equity Market Breadth & Technical


Source: Bloomberg. Data as of 02/18/2022

What does US fixed income future market tell us?

The current futures market implies a 31bps rate increase in the upcoming March FOMC meeting, slightly higher than the implied rate increase of 28bps as of Jan 31, 2021. The new implication can translate to as much as 30% probability of a 50bps hike and 70% of a 25bps raise.

This may suggest that investors have already priced in a 50bps increase to some extent. Against that backdrop, Nasdaq has been moved rather little over the past year - even nowadays with Ukraine adding another downside uncertainty to the market sentiment.

Table 2: US Implied interest rate change in 2022 in future market


 Source: Bloomberg. Data as of 02/18/2022

Style rotation:

The style rotations, growth / value and large / small cap, have both peaked on Jan 27, one day after the January FOMC meeting. This is because the market uncertainty was somewhat erased while the tone was still hawkish. The value/growth gap has marginally maintained at the below-peak level since then. In the meantime, the large cap/small cap gap also peaked at end-January, but unlike the value/growth case, it narrowed quickly in February.

Chart 1: Russell 1000 value (upper line) – Russell 1000 growth (bottom line) gap, re-weighted at 12/31/2021


 Source: Bloomberg. Data as of 02/18/2022

Chart 2: Russell 2000 value (upper line) – Russell 2000 growth (bottom line) gap, re-weighted at 12/31/2021


 Source: Bloomberg. Data as of 02/18/2022

Chart 3: Russell 1000 (upper line) – Russell 2000 (bottom line) gap, re-weighted at 12/31/2021


  Source: Bloomberg. Data as of 02/18/2022