MW What to make of this week's action in the stock market and the 'Great Rotation'
By Philip van Doorn
Also: Surprising data on home prices; combining your investments with your politics; and a retirement account mistake you can avoid
Wednesday might have been frightening if you are the type of investor who follows day-to-day action. The S&P 500 SPX pulled back 2.3% for the day, while the tech-focused Nasdaq-100 index NDX fell 3.7%.
Let's dig a bit further into what is now being termed the "Great Rotation," as a lot of investment money has been flowing to asset classes that were de-emphasized as Big Tech led the bull market in 2022 and 2023. The largest three components of the SPDR S&P 500 ETF Trust SPY are Apple Inc. $(AAPL)$, Microsoft Corp. $(MSFT)$ and Nvidia Corp. $(NVDA)$, which make up a combined 19.8% of that $554 billion portfolio tracking the large-cap U.S. benchmark. Those companies also make up 25% of the Invesco QQQ Trust QQQ, which tracks the Nasdaq-100.
In turn, the information-technology sector XX:SP500.45 of the S&P 500 was down 4.1% on Wednesday. All price changes in this article exclude dividends.
Now let's look at a set of numbers for July, through Thursday:
Index July price change 2024 price change 2023 price change 2022 price change Price change since end of 2021
S&P 500 -0.6% 13.2% 24.2% -19.4% 13.3%
Dow Jones Industrial Average 1.9% 6.0% 13.7% -8.8% 9.9%
Nasdaq Composite -2.2% 14.5% 43.4% -33.1% 9.8%
Nasdaq-100 -3.3% 11.9% 53.8% -33.0% 15.4%
Russell 1000 -0.5% 12.5% 24.5% -20.4% 11.4%
Russell 1000 Growth -3.0% 15.5% 41.4% -29.8% 14.6%
Russell 1000 Value 2.4% 8.3% 8.8% -9.6% 6.6%
Russell 2000 7.2% 9.7% 15.1% -21.6% -1.0%
S&P SmallCap 600 6.8% 6.5% 13.9% -17.4% 0.2%
Source: FactSet
The table goes back to the end of 2021, to include the tech-lead decline in 2022 that was followed by a recovery in 2023. From the recent positive action for the Russell 1000 Value index RLV, the Russell 2000 RUT (a small-cap benchmark) and the S&P SmallCap 600 SML, you can see the Great Rotation playing out, at least this month.
MarketWatch's William Watts explained how Wednesday's stock-market slide related to central banks' interest-rate policies, while Joseph Adinolfi looked into the reasons for the Great Rotation and described three factors that might make or break this trend.
Other stock-market coverage related to the Great Rotation:
These 'cheap' stocks could get a tailwind no matter who wins the White House20 value stocks scoring highest for long term returns on invested capitalThis S&P 500 sector is expected to grow profits most rapidly through 2026 - and it's not tech. Here are 14 related stocks.
Earnings pressure for Big Tech
One development that magnified the Great Rotation this week was the sour reaction to Big Tech earnings reports.
Tesla Inc. $(TSLA)$ announced mixed results for the second quarter. with some spice from Chief Executive Elon Musk during the company's earnings conference call.
Tesla reaction:
Is Tesla's stock having an identity crisis?By backing Trump, Tesla's Elon Musk seems to be ignoring reality once againHow Elon Musk's politics could threaten Tesla's profits, according to EdmundsRobotaxis, FSD, AI: These are a few of Elon Musk's favorite Tesla things
Google parent Alphabet Inc. $(GOOGL)$ $(GOOG)$ reported results that exceeded analysts' expectations. But the stock's 5% slide on Wednesday might have resulted from comments from company executives pointing to rising expenses and lower profit margins ahead.
The Ratings Game: Buy the dip on Nvidia and other chip stocks? Not quite yet, says this analyst.
Read this is you want to invest in residential real estate
Buyers of residential property may count on an attractive stream of rental income, but they might be even more focused on making a killing as the price of the property rises. Mark Hulbert cited a deep new study of long-term housing price movements that may surprise you.
Related: The hottest real-estate market this summer will be this Midwestern city, Realtor.com says
Michael Brush: These housing stocks, funds and ETFs could get a boost from lower home mortgage rates
Should your investments reflect your political leanings?
In this week's ETF Wrap, Isabel Wang looked at exchange-traded funds that select stocks based on how companies make political donations or on how members of Congress invest their own money. Here are the pros and cons of these approaches.
Don't make this mistake with your retirement account
Some people save diligently for retirement but make the mistake of not allocating investments within their accounts to match their long-term goals. Or they might not look for ways to minimize fees, which can cut into their long-term returns.
Beth Pinsker examined another common mistake made by people who move their retirement accounts. The process can be complicated and you may wind up not having your money invested the way you had expected. Here's how to make sure your money is invested properly when you transfer a retirement account.
IPO Report
This has been 2024's biggest week for initial public offerings of stock by U.S. companies.
The IPO Report provides ongoing coverage of IPO announcements and activity.
This week's IPO action included successful offerings from Lineage Inc. (LINE), which raised $4.4 billion on Wednesday, and OneStream Inc. $(OS)$, which saw its shares rise 30% out of the gate.
The CrowdStrike debacle
A security-software update by CrowdStrike Holdings Inc. $(CRWD)$ on July 19 caused computer-system outages worldwide. The company's stock fell 26% in the week ending Thursday.
With network problems continuing to affect companies, Emily Bary explained what the CrowdStrike outage meant to investors.
More coverage:
The CrowdStrike chaos will happen again. Here's why.No, CrowdStrike didn't send $10 gift cards to customers after its outage. Here's what happened.Here's where CrowdStrike investors are right to be worried - and where they can breathe easierCrowdStrike's stock stems its bleeding, but even the bulls see some risk
More fallout: Delta's IT outage woes are costing the airline $350 million and counting, analysts say
Another industry upheaval
Shares of SunPower Corp. (SPWR) have fallen 71% this month, and a three-year lookback shows a decline of 96%, according to FactSet.
Below you'll find several pieces from our James Rogers, who has covered the aftermath for investors and consequences for SunPower's competitors:
SunPower's stock just had its worst week on record, and this analyst sees more pain aheadSunPower's stock skyrockets despite company's challenges: 'Shorts dug themselves a hole here'SunPower's woes spell good news for these solar names
Learning with the Moneyist
Quentin Fottrell - the Moneyist - often helps readers who are facing difficult conflicts over money. His answers to their questions often include expert opinions and advice from lawyers, estate planners and financial advisers that he interviews. Here are recent examples:
'I am an only child': My father left his $50 million estate to my stepmother in an irrevocable trust. I inherited $1 million. Is this reasonable?'I loved and respected them': My late father wanted me to inherit his house, but he made a small legal error. Now my two siblings want their pound of flesh.I'm a widow in my 70s. My financial adviser wants me to invest 20% of my assets in annuities. Is that a good idea?
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-Philip van Doorn
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July 26, 2024 12:52 ET (16:52 GMT)
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