Investors have a new favorite stock and sector: Amazon and consumer shares

  • Consumer discretionary overtook tech as the most crowded sector last month, data from Bank of America Merrill Lynch shows.
  • Funds increased their relative weight (compared with the S&P 500) in discretionary slightly in February, while strong selling in the semiconductor space pushed tech to its lowest relative weight in 15 months.
  • Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Merrill Lynch, said in a note to clients Friday that fund managers may be piling into these names as interest rates rise.
Workers pack and ship customer orders at the 750,000-square-foot Amazon fulfillment center in Romeoville, Illinois.
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Workers pack and ship customer orders at the 750,000-square-foot Amazon fulfillment center in Romeoville, Illinois.

Move over, tech. Wall Street has a new favorite sector, according to fund holdings data compiled by Bank of America Merrill Lynch: consumer discretionary.

The sector overtook tech as the most crowded last month, the data shows. Funds increased their relative weight (compared with the S&P 500) in consumer discretionary slightly in February, while strong selling of semiconductor stocks pushed tech to its lowest relative weight in 15 months, according to the holdings data. The data reported by Bank of America Merrill Lynch were as of Feb. 22 and were compiled using FactSet Ownership Database numbers.

Tech became the most crowded trade in U.S. stocks last year as the sector handily outperformed the broader market. In 2017, tech rose 37 percent while the S&P 500 gained 19 percent.

Amazon is by far the most overweight individual stock in the consumer discretionary sector, which also includes retailers. According to the survey, 51 percent of funds are holding the stock. Booking Holdings — formerly known as Priceline — is the second-most overweight, with 38 percent of funds holding the stock.

Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Merrill Lynch, said in a note to clients Friday that fund managers may be piling into these names as interest rates rise.

"Managers have historically had lower exposure to stocks that are hurt by rising rates and higher exposure to stocks that benefit from rising rates," Subramanian said. "This is likely a result of their persistent underweights in bond proxy sectors and overweights in Tech and Discretionary."

Interest rates have been on the rise recently, with the benchmark 10-year U.S. note yield hitting a four-year high last month. Federal Reserve Chairman Jerome Powell also left the door open for more than three rate hikes this year, more than the market had been expecting.

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