The Brighter Side of Down Days

The markets’ 3-percent decline today has moved the major indices into negative territory for the month. If no turnaround happens during the last week of June, the Dow , S&P , and Nasdaq each will snap their 3-month winning streaks. That being said, there is still a bright side.

The Dow is down for the 5th day of 6 days. The last time this happened was on May 27. The Dow then rallied, up over 5% in 4 straight up days. Here is how June stacks up so far compared to the past year.

Down Days for the Dow Jones Industrial Average

The S&P 500 is down for a 4th out of 6 days. It was also down 5 of 6 days on May 27 before rallying.

Down Days for the S&P 500

Barring a major collapse in the next few trading days, the major indices are set for their first quarterly gain since Q3 2003. This would end a string of 6 consecutive quarterly declines for the Dow Industrials and S&P 500, which was their longest quarterly losing streak since 1969-1970. For the quarter so far: Dow Industrials up 10%, S&P 500 up 12%, Nasdaq up 16%.

Sectors Highs and Lows

What Goes Up… (The Rally)

Since the March bottom, the markets had showed impressive strength following their enormous sell-off from the all-time highs hit in 2007. Having rebounded sharply off their multi-year lows set back in March, stocks quickly went from being strongly oversold to largely overbought. Here’s how the major indices and sectors had performed from their March lows to their highs hit earlier this month:

Major Indices March-June Rally
Dow Transports +61%
Russell 2000 +56%
Nasdaq Composite +49%
S&P 500 +43%
Dow Industrials +37%

S&P 500 Sectors March-June Rally
Financials +116%
Industrials +61%
Materials +60%
Consumer Discretionary +55%
Techs +48%
Energy +40%
Utilities +26%
Consumer Staples +24%
Healthcare +22%
Telecom +18%

Major Sector Indices March-June Rally
Banks +119%
Brokers +89%
Insurance +88%
Oil Services +80%
REITs +76%
Healthcare +70%
Homebuilders +68%
Natural Gas Stocks +62%
Defense Stocks +56%
Retailers +54%
Semiconductors +52%
Gold Stocks +51%
Airlines +47%
Oil Stocks +36%
Biotechs +29%
Drugs +22%

…Must Come Down (The Retracement)

Since nearing (and in many cases actually hitting) the highs of the year over the past couple of weeks, stocks have recently lost some of their momentum. The current retracement has caused the broader indices to give up about one fifth of the large gains they accrued from March to June.

Take a look at the current performance of the major indices and sectors since they hit their highs earlier this month:

Major Indices From June Highs
Dow Transports -10%
Russell 2000 -7%
S&P 500 -6%
Dow Industrials -6%
Nasdaq Composite -6%

S&P 500 Sectors From June Highs
Materials -13%
Energy -13%
Industrials -11%
Financials -9%
Consumer Discretionary -8%
Techs -5%
Consumer Staples -4%
Telecom -3%
Healthcare -3%
Utilities -2%

Major Sector Indices From June Highs
Gold Stocks -20%
Oil Services -19%
Natural Gas Stocks -15%
Homebuilders -15%
REITs -14%
Oil Stocks -13%
Airlines -11%
Semiconductors -10%
Insurance -10%
Brokers -9%
Defense Stocks -9%
Banks -9%
Retailers -9%
Healthcare -5%
Biotechs -5%
Drugs -3%

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