The S&P 500 was flat on the day and the Dow was lower by 0.29%. Defensive stocks underperformed today as many names saw profit taking after big runs higher.
Cyclical sectors of the market were in favor after underperforming so far in 2013. Telecom, staples, and healthcare were laggards today while materials, banks, industrials, and semiconductors outperformed.
Consumer staples underperformed after Proctor and Gamble reported disappointing earnings. These stocks have been leading performers all year. When P&G earnings disappointed, other names in the space like Colgate- Palmolive, Clorox, and General Mills—all big winners this year—sold off in sympathy.
Biotech has been another big winner this year. Today, biotech stocks lagged after Amgen’s earnings release failed to wow investors. Managed care names reversed their recent trend after Wellpoint reported better than expected earnings.
Industrial stocks were led by defense names today. General Dynamics reported strong earnings. Boeing gave favorable guidance regarding orders. Defense companies are finding buyers after many management teams have said they will not be hurt by the sequester. Transport stocks traded in line with the tape. Federal Express was a leader. FedEx reported they signed a $10.5 Billion contract with the U.S. Postal Service.
Materials rallied led by steel stocks. Cliffs Natural Resources was in favor ahead of earnings released after the bell. Cliffs reported better than expected earnings after the close and was trading higher. Freeport McMoran rose by more than 4% as copper rallied by 2.5%.
Banks moved higher for the second straight day. Money seemed to be rotating out of some of the high dividend paying staples names into financials. Large money center banks and some of the super-regional banks saw most of the buying today. Several life insurance companies continue to outperform the market, rising by more than 1%. Banks seemed to return to favor this week after many large banks reported earnings last week. With earnings headline risk past, investors have poured into the space the past two days.
Energy stocks were especially strong with crude trading higher by 2.5% and natural gas rising by 1.5%. There was little in the way of key earnings announcements in the sector today. Both Exxon and Chevron reported they were raising their dividends by more than 10%.
AT&T put the telecom space under pressure today. Ma Bell had been a clear market outperformer this year. AT&T sold off by more than 5% today on profit taking and slight disappointment with portions of their results that were announced prior to the open.
Consumer staples stocks saw rotation away from the space after P&G‘s weak earnings and some rotation away from the winning area of the market. Many stocks in the area have increased so sharply this year concerns about valuations are buying raised.
Source: PFS Group
