The End of FANG? Most Stocks Break Out But the Nasdaq Is Going Nowhere

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FANG Stocks Fading as Vaccine Optimism Draws Investors to Small Caps

Stocks hit new highs last week on hopes of a coronavirus vaccine, but major technology companies like Apple and Tesla went nowhere.

Consider these points about the period between Friday, November 6, and Friday, November 13:

  • The S&P 500 rose 2.2 percent and closed at a new weekly closing high.
  • The Dow Jones Industrial Average advanced 4.1 percent and closed at a new weekly closing high.
  • The Russell 2000 small cap index ripped 6.1 percent and closed at a new weekly closing high.
  • The Nasdaq-100, home to most of the major tech stocks, slid 1.3 percent and remained below its August peak.

It’s the opposite of earlier this year, when investors stampeded into e-commerce companies like Amazon.com (AMZN) and work-from-home names like Zoom Video Communication (ZM). Last week focused heavily on reopening stocks that will benefit from increased travel and economic activity.

Energy benefited the most, rallying more than 17 percent. It was the sector’s biggest gain since the market rebounded from the financial crisis in March 20009. Banks and airlines followed.

Pfizer’s Coronavirus Vaccine

Pfizer (PFE) triggered last week’s rally by announcing its coronavirus vaccine was 90 percent effective. It followed a big surge following the presidential election a week earlier.

Those events have transformed sentiment, according to the American Association of Individual Investors. Almost 56 percent of respondents in the organization’s survey were bullish last week. That was not only the highest reading in almost three years. The 18-percentage point increase was also the biggest swing in over a decade, according to AAII.

S&P 500, daily chart, with 50- and 200-day moving averages.
S&P 500, daily chart, with 50- and 200-day moving averages.

But will it continue? There could be two warnings to consider. First, the S&P 500 reached its highest price in the first five minutes of trading on Monday morning and remained below it all week. Does that suggest it was just “knee-jerk” buying?

Second, coronavirus is more widespread than ever. The case count hit new highs last week, bringing back restrictions across the U.S.

Consumer in Focus

This week’s events mostly focus on the consumer sector and housing.

Today’s main items are quarterly results from Chinese e-commerce stocks JD.com (JD) and Baidu (BIDU).

Tomorrow features retail-sales data from the government and homebuilder-sentiment index. Home Depot (HD), Wal-Mart Stores (WMT) and Kohl’s (KSS) report earnings.

Wednesday has housing starts, building permits and oil inventories. Target (TGT), Lowe’s (LOW), TJX (TJX) and Nvidia (NVDA) report earnings as well.

Initial jobless claims and existing home sales on Thursday are the last noteworthy events for the week.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.