Economically sensitive areas of the U.S. stock market are flashing warnings over growth, even as major equity indexes edge higher.
Investors cited growing caution among market participants faced with a thicket of concerns, from fears of a possible U.S. default this summer to worries that the Federal Reserve’s aggressive monetary tightening could bring on a recession. A 7.3% drop in the Philadelphia SE Semiconductor index was a worrying sign, as chips are ubiquitous in a wide range of products. The index is still up 18% for the year.
Though the S&P 500 has shown resilience, just seven stocks -- Apple, Microsoft, Alphabet, Amazon, Tesla Meta Platforms and Nvidia -- were responsible for more than 88% of its year-to-date gain as of Thursday, according to Mike O’Rourke, chief market strategist at Jones Trading. Shares of United Parcel Service tumbled 10% on Tuesday after the world’s largest parcel delivery firm pegged annual revenue at the lower end of its forecast and warned of persistent pressure on volumes. The next day, shares of Old Dominion Freight Line also dropped 10% after the trucking firm missed quarterly estimates for profit and revenue.
Maley is recommending clients hold higher-than-typical cash levels because of concerns about a recession and because safer assets now have higher yields, while favoring energy and defense stocks.Overall, earnings have come in better than feared for the first quarter. With just over half of the S&P 500 having reported, earnings are on pace to have declined 1.9% for the first quarter from the year earlier period, according to Refinitiv. That is a smaller decline than the 5.
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