Many S&P 500 investors are still hiding from the bear. But some are stepping in front of what they think is a moneymaking moment in stocks.
Ten stocks in the S&P 500, including communication services firm Netflix, health care Intuitive Surgical, plus State Street, jumped 20% or more in the sudden rally that kicked off on Oct. 12, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That's an impressive gain: essentially twice a typical yearlong gain in just two week.
It's a gusty move for investors, though, as multiple fake-out S&P 500 rallies this year snared investors each time. Bulls are hoping stocks are low enough to price in an economic slowdown that might be at its worst in six months, says Nicholas Colas of DataTrek Research.
"Cautious as we are about the near-term direction of U.S. (and) global equities, it always pays to consider the other side of the trade," he said.
Surprise Rally In October
Seeing the S&P 500 rally is a welcome sight for investors battered all year with losses.
The S&P 500 is up 7.7% from the recent low on Oct. 12. That might not sound like much of a gain, but it's at least a break from the 9% drop in September and 3.5% drop in August. And all told it's enough to add $2.4 trillion back to the market values of companies. That helps undo some of the $11 trillion in paper losses investors suffered from this year so far, says Wilshire Associates. Besides, October is known as the "bear killer" month.
And it's interesting, too, to see it's not energy this time propelling the rally. It's financials. The Financial Select Sector SPDR ETF is up 9.8% from the Oct. 12 low. That's a larger rally than any of the other 11 S&P 500 sectors other than energy, which is up 11.1%.
What kinds of S&P 500 stocks are getting the most attention?
Big Financials, Big Gains
It's been a long time since financial stocks outperformed, but they're a favorite in this recent rally.
Two of the S&P 500 stocks to rally most in the mid-October rally hail from financials. And State Street is among those leading the charge. Shares of the asset-management firm are up more than 21% since this rally kicked off. That's been enough to add more than $4.6 billion in market value to the stock.
Shares went into hyperdrive following the firm's Oct. 18 report of third quarter earnings that topped expectations by more than 2%. The firm is benefiting from higher interest rates.
Finding Winners In A Bear?
Experienced investors know how risky it is to try to get into S&P 500 stock rallies too early. But earnings season has been emboldening investors.
Shares of Netflix are up nearly 37% in the rally. Investors think the company that provides streaming media to subscribers is overly beat up. Sure, the company's profit is expected to drop by nearly 9% this fiscal year. But now that shares are down more than 60% this year, investors seem to think now's the time to try again.
But beware. The S&P 500 hasn't rewarded bravery so far. "This is an impressive bear-market rally that will likely get faded as the Fed is nowhere near ready to downshift their tightening pace," said Edward Moya of Oanda.
Rally's Big Winners
Top gainers in S&P 500's 7.7% rally since Oct. 12
| Company | Symbol | % gain | Sector |
|---|---|---|---|
| Netflix | 36.9% | Communication Services | |
| Intuitive Surgical | 30.4% | Health Care | |
| Schlumberger | 25.9% | Energy | |
| United Airlines | 25.1% | Industrials | |
| AT&T | 24.0% | Communication Services | |
| Norwegian Cruise Line | 23.7% | Consumer Discretionary | |
| Halliburton | 22.8% | Energy | |
| State Street | 21.0% | Financials | |
| Universal Health Services | 20.3% | Health Care | |
| BlackRock | 20.1% | Financials |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
