Momentum Outperformance Versus Value Being Overbought

Here is a daily recap of the S&P 500 broken down by sector followed by sector heat map as momentum outperformance versus value being overbought. Stocks in heat map are based on the top 10 holdings of each sector ETF. Click on each picture to zoom in. Below is a summary of today’s action on Wall Street provided by CNBC:

US futures point to slightly higher open after new record highs on Wall Street

U.S. stock index futures are pointing to a slightly higher open on Wall Street Thursday morning after closing at fresh record highs, as investors continue to monitor the global economic impact of the coronavirus outbreak. At around 2:35 a.m.

The S&P 500 (SPY) slipped -0.38% today. Sector decliners led advancers 6 to 5 as shown below in the sector graph. Communication services (XLC) and technology (XLK) led decliners down with losses of more than 1%. Energy (XLE), financials (XLF), healthcare (XLV) and industrials (XLI) suffered minor losses of less than 1%. Real estate (XLRE) led advancers with a gain of more than 1%. Consumer discretionary (XLY), consumer staples (XLP), materials (XLB) and utilities (XLU) each enjoyed small gains of less than 1%.

The Dow Jones index dropped -128 points (-0.44%) to close at 29,219. The Nasdaq landed in negative territory by -66 points (-0.67%) to settle at 9,750.

Momentum Outperformance Versus Value Being Overbought

Stocks ended in the red Thursday as coronavirus fears as well as overbought market conditions led investors taking profits.

Some traders pointed to a report from the Chinese state-run Global Times, which said there had been a sharp increase in coronavirus cases at a hospital in Beijing. While the timing of the story did not match with Thursday’s move lower, it does tap into the market’s fears about the coronavirus weighing on the global economy.

“This market is just moving on momentum and, at this point, it’s priced close to perfection,” said Christian Fromhertz, CEO of The Tribeca Trade Group. “At this point, if we start seeing anything negative, it will probably force some people to start taking profits.”

Momentum stocks — which are characterized by their high earnings growth expectations — have been leading the broader market higher this year. On Thursday, however, the iShares Edge MSCI USA Momentum ETF (MTUM) dropped about 0.4%. Its value counterpart, the iShares Edge MSCI USA Value ETF (VLUE) was down 0.2%. Still, MTUM is up about 8.7% for 2020 while VLUE is flat. Fromhertz said momentum’s outperformance over value was “getting a bit stretched,” noting that “when something like that happens … usually we start seeing an unwinding of growth.”

Key Takeaways…

Tuchman: People already long equities, buying defensive investments as a hedge

CNBC’s Bob Pisani and Peter Tuchman, Quattro Securities, discuss the morning’s market activity.

Notable S&P 500 Movers…

Below I’ve highlighted some notable S&P movers (both winners & losers).

Credit: Sector Graph provided by Sector SPDR app. Sector breakdown provided by Charles Schwab. Sector heat map provided by finviz. Information Credit: News Headlines and quotes were taken from CNBC in the writing of this post.

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2/20/20

S&P 500 Sector Graph

Momentum Outperformance Versus Value Being Overbought

S&P 500 (SPY)

Momentum Outperformance Versus Value Being Overbought

Communication Services (XLC)

Momentum Outperformance Versus Value Being Overbought

Consumer Discretionary (XLY)

Momentum Outperformance Versus Value Being Overbought

Consumer Staples (XLP)

Momentum Outperformance Versus Value Being Overbought

Energy (XLE)

Momentum Outperformance Versus Value Being Overbought

Financials (XLF)

Momentum Outperformance Versus Value Being Overbought

Real Estate (XLRE)

Momentum Outperformance Versus Value Being Overbought

Healthcare (XLV)

Industrials (XLI)

Materials (XLB)

Technology (XLK)

Utilities (XLU)

S&P 500 Sector Heat Map

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