Rising bond yields and oil prices weighed on stocks last week, though a mostly in-line CPI report on Friday sparked a rebound. The S&P 500 still fell 0.8%, with nine of the 11 sectors declining. Energy (OW) led, rising 2.0%, and it tops the sector derby at 44.5% ytd. Communication Services (MW) was the only other gainer, up 1.1%. Health Care (OW) fell the most at 3.6%. Information Technology (MW) was nearly flat at -0.2% and is up 23.2% ytd, with fundamentals that continue to improve.
Let's take a closer look at Energy, Information Technology, and Health Care:
(1) Energy. We have recommended overweighting Energy as a hedge against geopolitical risk. Brent fell below $90 a barrel in late August as diplomacy briefly eased tensions in the Persian Gulf. Last week, the US and Iran exchanged strikes, and Houthi attacks set Saudi oil facilities on fire. Brent futures rose to $104.61 on Friday (chart). The S&P 500 Energy index is at a record high.
