Wal-Mart Stores (WMT) has broken out to new highs while Amazon.com (AMZN) drifts aimlessly. That’s one of many unusual things happening in the stock market right now.
First, last week’s rally was strange. The S&P 500 closed near new record highs — even though not a single major sector broke out. Even odder are the names pushing to new record levels.
The triumph of WMT over AMZN may be the most prominent example, but it’s not the only one. A quick analysis with RadarScreen® shows a mix of utilities, trash haulers and consumer staples at or above their 52-week highs. Meanwhile, the prominent “FANG” stocks that dominated the market in recent years are nowhere to be seen.
On Monday, RadarScreen showed 37 members of the S&P 500 hitting new highs. Microsoft (MSFT) was the largest by market capitalization, followed by WMT. Other biggies included Procter & Gamble (PG) and Coca-Cola (KO).
Chip Stocks Totally Absent
Not a single semiconductor company made the cut. Analog Devices (ADI) ranked the highest at 4 percent from its 52-week high. Meanwhile the broader Philadelphia Semiconductor Index ($SOX) was 12 percent away from its old peak.
Software companies like MSFT, on the other hand, are blooming. Former laggard Oracle (ORCL) came within a few cents of a new high after transforming its business as legacy database users finally migrate to the cloud.
The two industries face very different situations. Chips have struggled with weak orders and a saturated smart-phone market since last year. Then you also have the trade war with China, which consumes almost half the planet’s semiconductors.
Software companies, on the other hand, have spent years building sticky subscription-based business models and offering new services in the cloud. They also have much less exposure to China.
Utilities Hitting Highs
Utilities had the most members on the list, accounting for 14 of the 37 companies hitting new highs on Monday. They have very limited exposure to China and also benefit from the Federal Reserve’s recent shift to low interest rates.
It’s also interesting to take a look inside the health-care and financial sectors. RadarScreen showed that non-drug companies like Stryker (SYK) and Abbot Laboratories (ABT) approached new highs while major pharmaceuticals and health-insurers were nowhere to be seen. This follows a trend covered several times on Market Insights.
Major banks and security firms like Goldman Sachs (GS) and JPMorgan Chase (JPM) are absent from the list because the flattening yield curve is squeezing profits. But financial exchanges like Intercontinental Exchange (ICE) and Nasdaq (NDAQ) have broken out.
Discounters Still Going Up
Another trend that cannot be ignored is the ongoing strength in discount retailers. WMT and Dollar Tree (DLTR) were on Monday’s list, while Dollar General (DG) appeared last week. Remember, several reports show wages are now rising more quickly at the lower end of the income scale.
This trend is disproving a lot of common assumptions about consumer spending. Typically a strong economy and low unemployment would lift more discretionary items like apparel and autos. But this time around it’s different as shoppers abandon malls in favor of the Internet.
In conclusion, tariffs worries are squeezing high-profile technology stocks and low interest rates are hurting financials. But surveys show a lot of cash is still on the sidelines. Hopefully this story helps you understand some of the places investors are putting money as they adjust to new circumstances in the market.