Wall St Week Ahead Last year's laggards lead U.S. stocks' 2023 rebound, for now

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U.S. stocks that took a beating last year are surging in the early weeks of 2023, leading markets higher. Some investors believe that trend is unlikely to last.

While it’s not unusual to see a reversal of trends to begin a year, "the extent to which it’s occurred is pretty dramatic,” said Walter Todd, chief investment officer at Greenwood Capital. “It certainly can’t continue at the extremes it has been.”

While falling yields often increase the allure of equities in general, they are particularly beneficial for the technology and growth stocks whose valuations suffered when yields shot higher in 2022. "The market leaders to-date ... are vulnerable to the higher-for-longer interest rates and a slowing economy," strategists at the Wells Fargo Investment Institute said in a note Thursday. "We do not view the recent breadth and leadership as sustainable -- yet -- and prefer not to chase equity rallies at this time."

 

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