By Joseph Adinolfi
The rally is once again broadening beyond tech
Consumers are still spending, and that is helping to boost shares of companies in more cyclical industries.
Stock-market pessimists love to complain about how a small group of names, mostly linked to the AI trade, have done much of the heavy lifting over the past couple of months for major equity indexes like the S&P 500.
But that has started to change over the past few weeks. Shares of banks, airlines, retailers and other industries that had struggled since February have started breaking higher, lessening the market’s dependence on hot tech stocks and catching the attention of chart-watching technical strategists.
The trend slammed into reverse on Wednesday after the latest Federal Reserve projections penciled in the risk of an interest-rate hike later this year, spooking stock-market investors. But an ETF that tracks an equal-weighted version of the S&P 500 SPX was still outperforming its capitalization-weighted sibling so far this week as of Wednesday’s close, FactSet data showed.
The State Street SPDR S&P Bank ETF KBE recently went on a seven-day run, its longest winning streak since April, according to Dow Jones Market Data. The ETF closed Wednesday 3% below its Feb. 6 record high as it tallied its second day in the red this week.
That didn’t stop the broader financial sector from trending higher, however. Although the State Street Financial Select Sector ETF XLF fell 0.6% on Wednesday as stocks sold off as Federal Reserve Chair Kevin Warsh held his first press conference, the ETF had been up by as much as 1%, after rallying 4.1% amid a four-day winning streak through Tuesday.
The 14-day relative-strength index, a popular momentum gauge, had indicated in morning trading Wednesday that the ETF was trading at its most overbought level since Nov. 29, 2024, according to Dow Jones Market Data.
“The banks are breaking out to new all-time highs, that’s probably the most important chart in the world to me. I’m old school – when you see the banks making all-time highs, that’s not indicative of a bearish regime,” said J.C. Parets, a market technician and founder of TrendLabs.
A-D line
After a brief pause, the New York Stock Exchange advance-decline line starting Dec. 31, 2019, hit its first record high since early May on Friday. It has continued to push higher since, hitting a new record as of Tuesday’s close, according to Dow Jones Market Data.
The advance-decline line rises when the number of stocks climbing on a given day increases. After trailing the S&P 500, the equal-weighted version of the index hit a fresh record high on Monday, according to FactSet data.
This should help quiet concerns about the market’s reliance on hot technology stocks and other AI-linked names. In the days since its blockbuster IPO, SpaceX (SPCX) has established itself as one of the top six most-valuable companies in the U.S., briefly eclipsing Amazon (AMZN).
“This is definitely good because technology stocks have been crazy volatile. So it’s a good thing that we can at least count on the rest of the market to behave,” said Hardika Singh, an economic strategist at Fundstrat Global Advisors.
Consumer stocks are heating up
The fact that more sectors have been trending higher recently has helped limit losses for the S&P 500, which has encountered bouts of turbulence over the past two weeks, including a painful selloff for the Nasdaq Composite COMP on June 5.
ETFs tracking shares of retailers, like the State Street SPDR S&P Retail ETF XRT, have been breaking out lately, according to technical strategists. U.S. Global Jets ETF JETS, which tracks shares of airlines, was nearing its record high from earlier this year. The S&P 500 Hotels Resorts & Cruise Lines Sub-Industry Index XX:SP500.25301020 has exhibited a similar pattern.
Economic data in the U.S. has been heating up lately, signaling that manufacturing activity and the labor market are picking up. On Wednesday, retail sales data from May showed consumers have been holding up, even if spending had been largely flat after being adjusted for inflation.
“If you want to get tickets to the World Cup, good luck,” Perez said. “People are spending a lot of money.”
Michael DeStefano and Ken Jimenez contributed
-Joseph Adinolfi
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06-17-26 1754ET
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