Tesla, Meta And Other Earnings Will Test Stocks’ Recent Selloff
Investors appear to be favoring value stocks over growth in the latest market downturn, which saw the biggest drop for US equities last week since the Silicon Valley Bank collapse.
(Bloomberg) -- Investors appear to be favoring value stocks over growth in the latest market downturn, which saw the biggest drop for US equities last week since the Silicon Valley Bank collapse.
The S&P 500 index’s 3% decline last week presents a different narrative to last year’s banking crisis. Tech giants like Super Micro Computer Inc., Tesla Inc. and Nvidia Corp. bore the brunt of the fall, compared with a resurgence in bank stocks. This hints at a rotation from growth to value stocks — a shift that has failed to materialize over the past years.
As traders recalibrate, attention turns to upcoming US big tech and European bank earnings. The S&P 500 is set for its busiest earnings week by market value, with four of the Magnificent Seven, including Microsoft Corp. and Facebook parent Meta Platforms Inc., reporting.
Here are some charts that capture the market mood:
Last week’s sell off left tech stocks underperforming the S&P 500 by the biggest gap since 2009:
Financial stocks advanced the last three trading days of the week, bringing its relative strength against the broader market to the highest level since the SVB crisis:
The early signs of a rotation benefit Europe’s heavier weighting in financial companies, and lighter reliance on tech firms:
That difference in composition is showing up in momentum readings. The S&P 500 has fallen for six straight days, leaving the relative strength index — a tool used in technical analysis — near oversold territory. The Stoxx 600 Index, by contrast, has risen four of the past six days and momentum is shifting higher.
The test in the US comes this week. There are high growth expectations for Magnificent Seven companies reporting earnings, barring Tesla:
In Europe, banks will also be posting earnings, with Barclays Plc, Deutsche Bank AG and BNP Paribas SA taking the limelight. It’s a sector that has long been undervalued against US peers on a price-to-book basis, but 2024 has shown investors favoring the European names.
NOTE: Daniel Curtis heads up markets for Bloomberg TV. The observations are his own and not intended as investment advice. For more markets analysis, see the MLIV blog.
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