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Banks And Discretionary Stocks Lead S&P 500 Higher In Race To 2,700
Do you believe? It would seem this market still has another leg left to go higher, with the push to 2,700 officially on. We opined last week that hedge fund underperformance coupled with a pullback that was shallower than expected could lead to a market melt-up over the final 5 weeks of the year. It would seem that push is happening, with an S&P 500 up by nearly 1 percent, closing right around 2,627, 73 points, less than 3 percent from 2,700.
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Today’s rally was undoubtedly not tech or biotech led either, a positive. It means the market is starting to broaden out, and buyers are finding opportunities in other sectors. It would help to explain why the Nasdaq Composit was up only 35 bps on the day.
The Nasdaq Biotech ETF ($IBB) is up just 15 bps and is sitting at $311; the poor performance is partially tied to Regeneron ($REGN), which is trading down over 2 percent on the day. Regeneron carries a 6 percent weighting in the ETF and is the 5th largest component.
The good news for the group is that the ETF continues hold, and a rally from here is likely coming.
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Surprisingly technology stocks performed poorly by today’s standards, with the Technology ETF ($XLK) up about 25 bps, with the ETF now at $64.70. Apple ($AAPL), Facebook ($FB) and Alphabet ($GOOGL) are three notable laggers; all three are DOWN on the day. High flying Nvidia ($NVDA) is also down on the day, as well as Broadcom ($AVGO). Nvidia broke a trendline today, probably not catastrophic, but it could mean more selling is on the way.
Perhaps, some profit taking? There is no doubt that all of the stocks mentioned above are some of the best performing names in the market this year, and it is profit taking season.
Consumer Discretionary Stocks
Netflix ($NFLX), a consumer discretionary stock, is up by 2 percent and is helping to lead the group higher which is a good reason why the Consumer Discretionary ($XLY) is up over 1 percent trading at nearly $96, we noted the setup for the breakout back on November 10.
The Financial ETF ($XLF) rallied by over 2.5 percent today. The bank stocks have been a terrible call all year on my part, every time I think I have it figured out, the opposite happens. The Fed appears to continue to be on pace to keep hiking rates, which is optically considered as a positive for banks because interest income should climb. But remember banks borrow short and lend long, and while the short-end of the curve has been rising all-year, the long-end has not. This is causing the yield curve to contract or flatten. The banks need a round of inflation to get the long-end rising again; otherwise, I’m just not a believer in the banks. We can see the ETF stopped rising right at resistance today.
But what do I know, I haven’t gotten it right all year.
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Michael Kramer and the Clients of Mott Capital own shares of GOOGL and NFLX
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
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Tags: #biotech #technology #stocks #sp500 #banks #consumer #discretionary #performance #investing