Hide behind defensives? That doesn’t seem like such a crazy strategy lately as investors wait to see if worries about the U.S. economy turn into real problems in the coming year.
Tuesday’s session offered the most recent evidence of that as health care, consumer staples and utilities drove the gains for the SP 500. Compare these numbers—the Utilities Select Sector SPDR
is up 4% for the quarter, while the Technology Select Sector SPDR
has slumped over 12%.
Read: Utility stocks have beaten the SP 500 in two months of turbulence and in the long run
Another burning question for investors is whether the bloodletting has stopped for shooting-star growth names—Facebook
and Google-parent Alphabet
—which have been shoved into bear territory after helping to drive a nearly decadelong bull market.
Our call of the day from analysts at Canaccord says stay hunkered down. They see the outperformance for defensives as just getting started, because FAANG underperformance is also in its early innings.
Defense stocks were supposed to be the story for 2019 but have stepped up to the plate early because big value sectors—financials and energy—didn’t, say Canaccord’s Martin Roberge and Guillaume Arseneau.
Portfolio managers haven’t seen any big hurt when it comes to that group of growthy stocks because year-to-date, some of those tech-focused names are still outperforming the market, they note. Beaten-down Apple is still up nearly 3% year-to-date, against a 0.3% rise for the SP.
“We expect the real pain will come when a clear rotation occurs. This rotation should get under way when it becomes clear that earnings growth for FAANGs and other technology names in 2019 do not live up to expectations,” said the Canaccord analysts. And that second wave of selling should start in January when fourth-quarter results start rolling out, they say.
Last word goes to hedge-fund manager Mark Yusko, who likens this year’s stock pullback to a “melting ice cube.”
“I think next year, with the economic slowdown, it gets worse—probably double-digit drawdown. The big year is 2020, when the credit bubble starts to blow up,” as companies that have been binging on cheap debt will have to pay the piper,the founder and CEO of Morgan Creek Capital told CNBC.
futures are firmer, with all eyes on a speech from Fed Chairman Jerome Powell due later. The SP
all closed higher on Tuesday.
are also pretty flat.
Read: What if the U.K. parliament rejects May’s Brexit deal? Here are 4 scenarios
Check out the Market Snapshot column for the latest action.
is up a bit, while Asian stocks logged solid gains, with the Nikkei
Down 20% with just three sessions left in November, Apple
is on track for its worth month since the week ending Sept. 30, 2008, when markets were in the grip of the financial crisis and the iPhone maker endured a 32% plunge. See just below for that sobering chart of the day:
“Apple has become synonymous with the macro narrative, a state of affairs that compounds its already outsize sway over the broader market,” notes the anonymous blogger behind The Heisenberg Report.
The blogger also points out this cold-comfort chart, that shows how the 10-day correlation between Apple and the SP 500 is at the highest of 2018:
In a wide-ranging interview with the Washington Post, POTUS laid into Fed Chief Powell—due to speak at noon—saying he wasn’t “even a little bit happy with my selection of Jay,” and blaming him for Wall Street’s woes. Trump also threatened to cancel a meeting at the G-20 this weekend with Russian President Vladimir Putin over a clash between that country and Ukraine.
In a separate interview with Politico, Trump said he’d shut down the government over border-wall funding.
is popping higher after the software company’s earnings and its outlook beat forecasts. The cloud company could be a haven in a potential tech storm.
is sliding on results and Burlington
is up after lifting its earnings outlook.
Just months after launching, YouTube—owned by Alphabet’s
Google—is reportedly pulling back on its premium subscription service.
Cannabis company Curaleaf
tanked in Canada after posting a substantial loss.
worker, Mark S. Luckie, says his company is “failing black employees and its black users,” as he spoke of widespread discrimination at the social media company in a letter he made public.
Also on the economic beat, third-quarter GDP and new home sales have been out this morning.
Read: Why $1 million won’t be enough for most of us to retire
GOP’s Cindy Hyde-Smith wins runoff election in Mississippi
Paul Manafort’s lawyer kept POTUS’s legal team up-to-date about dealings with special counsel Robert Mueller.
11th-century scroll from the “Chinese da Vinci” sells for nearly $60 million
Your holiday tipping guide for 2018
Investigators say pilots struggled in vain to control the doomed Lion Air flight
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Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.
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