Futures are up and European stocks are higher as investors await key data points this week. AAPL is stabilizing, quoted up $1.25 in pre-market trading, while NVDA is up 3 points as well. The NOBL ETF, which tracks Aristocrat stocks, is up 4.5% year-to-date.
Investors are expecting important data this week and anticipate numerous comments from the Fed before they enter a lockdown mode. Meanwhile, the Dow Industrials, S&P, and Nasdaq all saw gains on Friday, while the Russell and Transports lost ground. However, all indexes ended the week in negative territory due to mixed economic data, divergent comments from different Fed heads, the China shot at Apple, and a retreat in NVDA, causing some investors to question the sustainability of the tech rally.
Apple lost 6% for the week after Chinese President Xi Jinping demanded that government officials stop using their iPhones at work. This decree has raised fears that it will spread to a wider audience in China. Additionally, Chinese tech company Huawei, which was subject to US sanctions for its potential spying capabilities, has introduced a new phone that rivals the iPhone, indicating that China has overcome the US sanctions.
NVDA experienced profit-taking due to concerns about valuation and upcoming economic data. Some investors also highlighted concerns about Chinese export curbs posing a risk to the US semiconductor industry. The tech sector’s high valuation, trading at 25.6 x’s projected earnings compared to the longer-term average of 18.5x, suggests caution.
Utilities was the only sector to make gains for the week. The worst performing sector, utilities rallied 3%. Defensive plays such as consumer staples and healthcare were down 3.8% and 2.7% respectively. XLC, representing the communications sector, leads with a 39.5% gain year-to-date, followed by XLK (technology) up 38.8%, and XLY (consumer discretionary) up 30.6%.
In addition to the major sectors, various industries have seen gains. The value trade, growth trade, home builders, airlines, disruptive tech, semiconductors, cybersecurity, small-cap growth, and mid-cap value have all seen positive performance. Aerospace and Defense stands out as a sector that is undervalued despite global events.
Stocks in industries acting as bond proxies, such as utilities, healthcare, and consumer staples, are known as Aristocrats. These stocks that consistently grow dividends for at least 25 straight years have attracted investor interest due to their discounted prices. Building exposure to these sectors may be a good strategy if there are cracks in the economy in the coming years, potentially in 2024. These stocks can be found in the Proshares NOBL ETF, which is up 4.5% year-to-date.
Overall, investors are closely watching key economic data points this week as they assess the sustainability of the current market rally.