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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.
Biotech
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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Why The S&P500 Could Melt-Up Into Year End
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 Technology
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.
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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 $96, we noted the setup for the breakout back on November 10.
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Financials
The Financial ETF ($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.
Good Night
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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
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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