The stock market is hitting new highs, but most stocks are struggling. Even news that would normally move stocks is not doing the trick, suggesting that stocks aren’t an attractive investment for the time being.
of
S&P 500 Index
It fell 0.1% for the week.
Dow Jones Industrial Average
It fell 0.1%
Nasdaq Composite Index
It increased by 0.2%. However,
Invesco S&P 500 Equal Share
Exchange-traded funds fell 0.7%. Unlike market-cap-weighted indexes, the ETFs hold equal amounts of each stock, so their moves reflect a worsening actual performance of the average stock.
The equal-weighted ETF has been trying but failing to break out of its all-time high of $169. FedEx’s positive outlook for the global economy hasn’t motivated buyers to stomp the fund to new highs. On Wednesday, FedEx said its revenue for fiscal 2025 would grow by a low-to-mid single-digit percentage, a clear indication of growing global demand for goods. But the equal-weighted S&P 500 fell 0.4% on the day.
“It’s a poor little market that can’t find its way,” wrote Frank Gretz, a market technician at Wellington Shields. “A healthy market is one that has participation, and this one is lacking.”
Friday’s inflation report also left markets unresponsive. The personal consumption expenditures index rose 2.6% year-over-year in May, down from 2.7% in April. That pushed the 2-year Treasury yield, a barometer of federal funds rate expectations, to 4.67% from 4.74% last week, which would strengthen the case for a rate cut. But the S&P 500 was up just 0.1% on Friday as markets shifted focus from interest rates to concerns about economic growth.
“All of a sudden, investors are looking at the economic data in a different way, not just saying it’s great that the Fed is cutting rates, but they’re thinking we might be heading for a recession,” said Seema Shah, senior global investment strategist at Principal Global Investors.
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This could encourage investors to stick with Big Tech, particularly the Magnificent Seven, which had a strong week with five of the seven stocks rising.
,
Microsoft fell 2.4%
,
These companies, which fell 0.6%, do well in good times, but their stocks could still outperform if the economy slows because their growth is less dependent on the economy and more on bigger themes like artificial intelligence. Plus, low interest rates make future earnings more valuable.
But there are plenty of concerns, most notably around valuation.
S&P 500 Information Technology Sector
The stock has risen 43% from its October low and trades at 33.5 times 12-month forecast earnings, likely reflecting already rising profits and falling interest rates.
Add it all up and investors could be in for a tough summer.
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Write Jacob Sonenshine jacob.sonenshine@barrons.com
