Sector Spotlight: Investors Brace For More Downside Ahead

June 30th, 2022

Thursday’s trading started off lower, but the major indices battled their way back, with the S&P briefly touching green.

However, stocks rolled back over again, finishing in the red. The close was indecisive, but the S&P’s failure to hold 3800 isn’t a good thing.

Yesterday’s Sector Performance

Utilities was the market leader, once again. Stocks in this sector continue to see weekly outperformance to most other sectors, providing the market with some much needed strength.

As oil drops, Energy stocks take the hits. As the pullback in prices continues into its third week, oil stocks seem to have fallen out of favor with investors as their prices experience little upside.

Five-Day Sector Performance

Utilities are still leading the weekly performance chart, with many of these stocks experiencing strong momentum. Some are on track to close the week over 5% compared to the overall market and its more than 2% decline.

Discretionary, Services and Tech are now grouping together at the bottom, not surprisingly. As inflation remains high and interest rates are set to continue their climb, these sectors will undoubtedly take it on the chin. A decrease in consumer spending would signal more declines in these areas.

ETF Trade Watch

Utilities Select Sector SPDR (XLU)

Although Thursday’s daily bar ended indecisively, there are still some reasons to be bullish, but the were slightly more reasons to be bearish going into the day. No industry is completely shielded from a slowing economy; however, the Utilities sector does seem to offer some safety from this downturn. Investors may pile into these names looking for a steady stock price, as well as the added benefits of dividends.

Consumer Discretionary Select Sector SPDR (XLY)

Consumer Discretionary is something of a mixed bag right now. The ETF’s largest holdings are Tesla and Amazon, so the performance is understandable. These stocks have not performed well in the past couple weeks, which has clearly dragged the rest of the fund down with it. As these names are also considered tech and growth names, a high interest rate environment is not going to be looked at as favorable.

What is known for sure is that Utilities is outperforming, and Discretionary is underperforming. XLU and XLY could be worth a look for both investors and traders alike. It may be wise to seek shelter in one and avoid the other as market forces continue their shift.