After finishing last week on a low note, the S&P 500 has bounced back a bit this week, on track to close the week higher by
more than 0.8 percent. But traders who have been following the 2017 rally closely may be doing a bit of a double take this week
when they look at some of the stocks that are leading the bounce and some of them that aren’t.
Among the top performers this week, Facebook Inc (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Netflix, Inc. (NASDAQ: NFLX) and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) are nowhere to be found. In fact, all four FANG stocks, which have been top
performers throughout most of the year, have underperformed the market this week.
Surprising Leadership
So which stocks have been leading the rally? Dillard’s Inc. (NYSE: DDS) is up 4.3 percent. Kohl’s Corporation (NYSE: KSS) is up 4.9 percent. J C Penney Company Inc (NYSE: JCP) is up 5.9 percent. And Macy’s Inc (NYSE: M) is up 8.0 percent in the past five days.
In fact, the SPDR S&P Retail (ETF) (NYSE: XRT) is up 2.4 percent this week, nearly tripling the return of the overall market.
The stocks mentioned above have been some of the worst-performing stocks in the market year to date, down between 7 and 55 percent
in 2017.
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What's Going On Here?
Is this week’s trading action the beginning of the big rotation from tech stocks to retail stocks? Probably not. Instead, it may
simply be both the bull market in tech and the bear market in retail taking a bit of a breather and pulling back a bit as longs
and
shorts take some profits.
Earnings expectations for tech stocks may have gotten a bit too high, while expectations for retailers got a bit too pessimistic. Whatever the reason, it’s far
from time for tech longs or retail shorts to panic. SPDR S&P 500 ETF Trust (NYSE: SPY) bulls, however, will be watching closely for technology or another sector to take
over the leadership role next week. The fundamentals in the retail sector give little indication the stocks mentioned above are
capable of sustaining an extended rally. For the overall bull market to resume, another group will likely need to take the reins
pretty soon.
Joel Elconin contributed to this story.
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