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Rotation in Focus During Another July Rally

Despite the slight pullback today on the heels of the disappointing June jobs report, July has been off to a good start for the markets.

Entering today’s trading, the Dow and S&P had been up 7 of the past 8 days, while the Nasdaq rose 8 days in a row (up over 8 percent), for its best 8-day winning streak in two years.

The markets have not been a stranger to big July rallies over the past three years.

S&P 500

  • July 2009: Up 12 percent over 13 days
  • July 2010: Up 9 percent over 15 days
  • July 2011: Up 7 percent over 8 days

“Risk On” Is Back in Vogue

The market’s rally over the last 8 days heading into the jobs report brought the Dow and the S&P back within a fraction of their multi-year highs set in April. Two weeks ago, when investors were fretting about the Greek debt crisis, the S&P 500 collapsed below its key 200-day moving average.

NYSE traders
AP
NYSE traders

Amid all the jitters, by middle of June, both the Dow and S&P fell as much as 7 percent below their April 29 highs. As the markets retreated, investors clearly got more defensive, with the typical consumer staples, healthcare, telecom, and utility stocks faring better.

But that has drastically changed since the markets hit their lows in mid-June, as investors have now rotated out of defensive names and jumped back into risk assets and more cyclical sectors, including industrial and commodity stocks.

Construction equipment maker Caterpillar, for example, was the Dow’s worst stock during the pullback from April 29 to June 15. Since that mid-June bottom, however, it has been the Dow’s best performer.


Nasdaq Pulls Ahead, Nears Decade Highs

Additionally, the Nasdaq Composite has had an even more impressive rally since hitting its own lows on June 17. Although it fell just short of closing at a 10.5-year high on Wednesday, it has risen nearly 10 percent since its June lows, far outperforming the Dow and S&P’s 6 percent gains.

Leadership within the Nasdaq has also been notably diverse, stretching far beyond tech stocks, with a number of companies headlining some of the Nasdaq 100’s best-performing stocks since the June lows:

Market’s Rally Since Mid-June


The Market’s Rally Since Mid-June

Here’s how the major indices and sectors have performed since the Dow and S&P closed at their lows on June 15:


All values as of the close on Thursday, July 7.

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