Market Extra: Why a closer look at stock-market performance reveals a ‘very muddled picture’

by | Apr 7, 2023 | Stock Market

Stocks remain off to a winning start in 2023 despite rising recession fears and uncertainty around the stability of the banking sector. Take a closer look, however, it’s clear the market is far from moving in lockstep. Instead, the S&P 500 has demonstrated a high degree of dispersion, a measure of the variation in returns within an index or a market.

Dispersion is on display as investors jump quickly on a hot stock or other investing trend, and are even quicker to get out of industries and sectors heading lower, said stock-market technical analysts, who described the phenomenon as a sign investors lack conviction over market direction. The S&P 500
posted a 7% gain in the first quarter of 2023 and a 3.5% advance in March. Dispersion in the index rose to 31% in March from 23% in the previous month, according to S&P Dow Jones Indices. March’s reading falls above the 75th percentile, historically.  Among the 11 sectors of the S&P 500, information technology
and communication services
led the way in March, up 10.9% and 10.4%, respectively, thanks to robust gains in megacap growth and tech stocks. At the other end of the spectrum, the financials sector
fell 9.7% after several regional bank failures undermined confidence in the financial system. “The dispersion of returns among sectors and industry groups has been dramatic since most stocks bottomed in September and October of 2022,” said Mark Arbeter, president of Arbeter Investments, in a Thursday note. “This is typical in a market that has no direction, whose market participants are confused, in an uncertain economy both here and abroad, with massive disagreements over where market and government rates are going, with OPEC making waves, a war in Ukraine to deal with, etc.”  See: Jobs report shows 236,000 gain in March — lifting 2023 total above 1 million — but U.S. labor market shows hints of cooling Since the collapse of Silicon Valley Bank, Arbeter has observed a fast rotation of capital into defensive stocks such as consumer staples
and healthcare
All …

Article Attribution | Read More at Article Source

Share This