Source: Wall Street News
Author: Bu Shuqing
Bank of America believes that as market breadth improves, “value stocks” may begin to outperform “growth stocks” represented by technology stocks. There are also institutions that expect US stocks to continue to fluctuate after entering June.
On the closing day of May, US stocks once again fell into sharp fluctuations. The three major stock indexes suddenly took a collective dive. At one point, chip stocks fell more than 3%, but other sectors such as energy stocks rebounded at the end of the session. Coupled with bottom-line funds entering the market, the S&P and Dow stopped two consecutive declines.
On Friday, the S&P 500 index rebounded at the end of the session and closed up nearly 1%, dragged down by giant stocks. The index previously fell nearly 1%. In May, S&P surged 4.8%, the best monthly performance since February.
Currently, US stocks are mainly dominated by a few tech giants, and many investors are betting that they will continue to lead the way and drive the overall market. However, Bank of America strategists believe that as market breadth (number of rising stocks) improves, “value stocks” may begin to outperform “growth stocks” represented by technology stocks.
Bank of America said that investors who bet on technology stocks may go through a difficult period and may become the next “painful deal” for technology stock investors.
Dan Wantrobski, analyst at Janney Montgomery Scott said:
Currently, the leaders have become losers. We've seen initial support broken in some of the leading sectors. Overall, we still expect US stocks to continue to fluctuate after entering June.
Matt Maley of Miller Tabak said that usually when there is “rotation” in the stock market, this is seen as a positive sign. However, the repeated rotation between technology stocks and other stocks in the past two weeks is actually a negative sign. It is more like a “shock” in the market, indicating that the market lacks a clear sense of direction and trend.
This is not a negative factor in itself, but when it comes after a good round of rebound, it often indicates that this upward momentum is weakening. As a result, it is often accompanied by some degree of correction (in the general market), even if it is only a mild correction.
Fawad Razaqzada of City Index and Forex.com said that technology stocks are now overvalued and may be subject to correction.
After several months of sharp increases without a new favorable catalyst, it is not surprising that there is a correction.
At the same time, the inflation index favored by the Federal Reserve brought benefits from cooling inflation. Roughly as Wall Street expected, the growth rate was slightly slower than the previous month. The US core PCE price index rose 0.2% month-on-month in April, the lowest growth rate this year. The year-on-year growth rate of the index slowed to a three-year low of nearly 2.8%.
Traders believe that for the Federal Reserve, which relies on data, this report should be “not too bad,” “slightly constructive,” and “slightly dovish.” Nick Timiraos, known as the new “Federal Reserve News Agency,” commented that the report largely met market expectations and was unlikely to change the Federal Reserve's existing wait-and-see position.
Editor/Jeffy