Stocks fell Tuesday, after posting strong gains in morning. Investors sold off big tech, but while many on Wall Street say we may see a near-term pullback, market leadership has begun to shift to cyclical sectors this week, a positive indicator for the market.
All three major U.S. indices fell Tuesday, with the S&P 500 down 0.52%. The 10 year treasury yield fell to 0.61%, a sign that investors were hedging their bets with safe assets.
In the morning, the S&P 500 had risen as much as 1.5%, as the White House said it may get virus tests to 2% of residents in each state.
By the afternoon, the broad indexes were down, as big tech stocks sold off. Amazon (AMZN) , Microsoft (MSFT) , Apple (AAPL) , Facebook (FB) , Netflix (NFLX) and Google (GOOGL) as lost between 2% and 4%. The group, which has a combined market cap of several trillions of dollars, have seen their valuations reach rich levels, compared to the last few years as the group heads into an earnings season that will test the market’s recent thesis that secular growth trends can largely cut though the virus-induced recession.
Since April 9, these stocks have easily outperformed the market, which, without big tech, would have seen flat gains or even losses.
But Wall Street is quick to note that the recent continuation of fiscal and monetary stimulus is supporting the plummeting consumer confidence, providing a lift to consumer discretionary and other cyclical stocks like regional banks.
The Invesco Regional Bank ETF (KBWB) rose 1.71% Tuesday. The S&P 500 is up almost 1% for the week so far.
Here’s what Wall Street had to say:
Jeffrey Buchbinder, Equity Strategist, LPL Financial:
“Stocks are no longer pricing in a recession and are no longer oversold from a technical analysis perspective, making the near-term risk-reward trade-off less favorable. We believe a more attractive entry point may emerge soon. Even with the S&P 500 up so much from the March lows, we continue to like the opportunity for long-term investors and maintain our overweight equities recommendation for suitable investors."
Tony Dwyer, Chief Market Strategist, Canaccord Genuity:
"Signs of life outside of mega-cap names. Although the S&P 500 (SPX) is up a few percent from that decision, we highlighted yesterday that you haven’t missed much because the average stock has been much weaker than the market, and any gains have been concentrated in just a very few names. That appeared to change yesterday with the NYSE cumulative advance/decline hitting a recovery high (Figure 1), breakout in Russell 2000 small-cap Index (Figure 2), surge in the KBW Bank Stock Index (Figure 3), and poised recovery high in the Industrials sector (Figure 4). Clearly, there is a game of catch-up taking place and it was the first day since the Fed decision that offense was back on the field."