Energy, Retail and Tech Stocks Continue to Lead Market Due South

Energy, Retail and Tech Stocks Continue to Lead Market Due South

Energy, Retail and Tech Stocks Continue to Lead Market Due South

$DIA, $SPY, $QQQ, $RUTX, $XRT, $VXX

Recently we have heard commentary about rising recession risk; widening corporate credit spreads; forecasting message of the sharp losses in cyclical sectors and former leadership stocks/sectors; lack of both gains and buy-the-dip success in November, which call into question the prospects of a seasonal rally.

Add to that Goldman Sachs advising clients to go to Cash.

A lot of that is Noise, what this market is caught up in the leaders growth concerns that have led to a de-risking effort.

The tech sector

The FAANGs and IT sector ar at the center of this de-risking move, victims of liquidation efforts that were liked to an unwinding of crowded trades that flowed from worries about a cyclical slowdown, valuations, and increased regulatory scrutiny.

Facebook (FB), Apple (AAPL), Amazon.com (AMZN), Netflix (NFLX), and Alphabet (GOOG) are all in Bear market territory.

The weight of those losses pressures the broader market, not just from a market-cap standpoint but also from a sentiment outlook.

These stocks are widely owned and they have always worked, which means they have left a lot of owners taken aback by their technical breakdown and the lack of any buy-the-dip assertiveness that has sustained them time and again in this longest of Bull markets.

This market looks like it is waiting for the now sidelined cash to show up again to instill some confidence in the notion that the broader-market sell-off has run its course.

The weakness in the former leadership names is 1 blow to this market, another is that the seasonal holiday cheer typically seen this time of year has not showed up yet.

There are some early rotation winners this month, as the real estate sector is + 4.4% MTD. But, overall the weight of losses in IT (-5.5%), comm services (-4.5%), and consumer discretionary (-2.0%) sectors have the S&P 500 off 0.8% so far this month.

In the energy sector

WTI crude, which has been pressured by ongoing supply concerns, dropped 6.9% to $53.44/bbl and extended its decliner to 30.5% from its 3 October highs.

Prices for Crude Oil and its derivative products factor prominently in the operating budgets of transportation companies, so the sharp drop should presumably be a positive development for the stocks. But, the weakness seen in transport stocks, evidenced by the Dow Jones Transportation Average being off 3.1% looks like softening confidence in the overall economic outlook.

In the retail sector

Earnings reports Tuesday reflected ongoing concerns over gross margin pressures, elevated inventory levels, disappointing same-store sales, and included some cautious guidance. But, Best Buy (BBY) 63.63, +1.33, +2.1%, and Urban Outfitters (URBN) 36.58, +0.97, +2.7% reports were upbeat.

The SPDR S&P Retail ETF (XRT) 44.00, -1.51, or – 3.3%.

S&P sectors that under-performed the broader market Tuesday were the cyclical energy (-3.3%), consumer discretionary (-2.2%), information technology (-2.2%), industrials (-2.1%), and financial (-2.1%) sectors.

Tuesday, the major US stock market indexes finished at: DJIA -551.80 at 24464.64, NAS Comp -119.65 at 6909.03, S&P 500-48.84 at 2642.03

Volume: Trade on the NYSE came in at 1.0-B/shares exchanged

  • NAS Comp +0.1% YTD
  • DJIA-1.0% YTD
  • S&P 500 -1.2% YTD
  • Russell 2000 -4.3% YTD
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bearish (-0.44) Bearish (-0.32) Bearish (-0.44) Very Bearish (-0.56)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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