By Chuck Mikolajczak
NEW YORK (Reuters) – Underperformance among defensive shares in sectors such as utilities, healthcare and consumer staples is a bullish sign for equities as investors move towards risk, according to a recent note from Oppenheimer.
Analyst Ari Wald said in a May 11 note to clients that while the S&P 500 continues to test its 2,120 resistance point, as long as the benchmark index holds its support level at 2,040 the long-term trend is bullish.
While the index is up about 1.4 percent for the quarter, Wald notes “performance has not been particularly bad in any of the S&P’s sectors,” with only utilities, off 2 percent, posting a decline for the quarter.
The drop in utilities, along with underperformance in defensive names such as Johnson & Johnson, Procter & Gamble Co and Wal Mart Stores Inc and gains in cyclical stocks such as Nike Inc and MasterCard Inc suggest investors are embracing risk and “these leadership trends suggest cyclicality should be rewarded in the coming months and argues against a major top,” according to Wald.
Among the top 100 stocks by market capitalization in the S&P 500, J&J is down 3.8 percent, Procter & Gamble is down more than 2 percent and Wal Mart is off 4 percent for the quarter. Nike is up 2.3 percent while MasterCard is up more than 7 percent in the same time frame.
Wald also cites Starbucks Corp, up 5.5 percent quarter-to-date, Morgan Stanley, up 5.8 percent and JPMorgan Chase & Co, up 7.8 as emerging leaders among cyclical stocks.
(Reporting by Chuck Mikolajczak; Editing by Ted Botha)