Stocks had been down Monday following a strong rally final week. Investors might have jitters forward of this week’s large Federal Reserve meeting, a deluge of earnings from prime tech companies and the jobs report on Friday.
The Dow fell greater than 200 factors, or 0.6%, whereas the S&P 500 and Nasdaq slid 1.1% and 1.7%. Still, it’s nonetheless been a strong begin to the yr for the market — and plenty of of final yr’s losers have led the best way on Wall Street so far in January.
The communications sector, with its many hard-hit tech and media firms, is the very best performing market group so far in 2023: It has surged practically 10%, in accordance with information from S&P Global Market Intelligence. It was the worst-performing sector in 2022, plummeting 40%.
CNN proprietor Warner Bros. Discovery, which plunged practically 60% final yr, has surged 55% so far in 2023 and is the very best performer within the S&P 500.
Several different media companies, previous and new, have additionally loved a resurgence this month. CBS proprietor Paramount has soared 36%. Disney
(DIS) is up 25%. Netflix
(NFLX) has gained greater than 20%. (So a lot for the demise of streaming media?) Shares of Facebook and Instagram proprietor Meta Platforms are up 25%, as nicely.
Consumer discretionary shares, which embrace many retailers and auto firms, have additionally loved a surprising rebound after tumbling final yr. The sector was the second-worst performer in 2022 with a lack of about 38%.
Just have a look at Tesla
(TSLA). Elon Musk’s electrical car large is up about 45%. It too had a depressing 2022, dropping practically two-thirds of its worth final yr.
Investors appear to be shopping for into hopes the Fed will proceed pulling again on the scale of its charge hikes after a number of traditionally giant will increase final yr and probably even pause later this yr. Increasingly, the sentiment is that the financial system might wind up heading for a so-called soft landing: a slowdown however not a full-blown recession.
Those hopes have boosted different shopper shares. Amazon
(AMZN) is up about 20% this yr. Cruise line homeowners Carnival
(CCL), Royal Caribbean
(RCL) and Norwegian
(NCLH) are among the many prime performers within the S&P 500. So are shares of on line casino firms Caesars
(WYNN), Las Vegas Sands
(LVS) and MGM
Still, some traders are anxious this yr’s market rally is eerily paying homage to prior market bubbles.
That’s as a result of it’s not simply high quality firms that are gaining. The resurgence can also be clear in meme stocks. GameStop
(GME) is up practically 25%. Movie theater chain AMC
(AMC) has soared greater than 25%. Crypto brokerage agency Coinbase has skyrocketed practically 70%, regardless of the collapse of rival FTX and Coinbase’s personal announcement of massive layoffs. Coinbase has been boosted by a rebound in bitcoin costs.
Then there are firms like Bed Bath & Beyond
(BBBY) and Carvana
(CVNA), each of which have loved strong features this yr regardless that there are rumors of potential bankruptcy filings. Even if these firms avoid Chapter 11, it’s clear that they are financially distressed.
“We have seen hypothesis return to the forefront,” mentioned Steve Sosnick, chief strategist with Interactive Brokers, in a latest report. Sosnick, not mincing phrases, has dubbed the rally in most of these firms a “flight to crap.”
Others fear that if the stock market stays this frothy, it’s going to push the Fed to maintain elevating charges far extra aggressively than traders anticipate: “The January melt-up in shares won’t final and the extra exuberant the market will get, the extra possible the Fed might be extra aggressive with charge hikes,” mentioned David Trainer, CEO of New Constructs, an funding analysis agency, in a report.
“Most traders don’t notice the Fed has to combat the inflation within the stock market, too,” Trainer added. “That means traders want to purchase shares with good fundamentals and actual money flows and promote the profitless, narrative-driven shares which have dominated headlines over the previous few years.”