April was a poor month for stocks. Despite encouraging company earnings, investors took a breather and indexes fell after five months of solid gains. The Nasdaq lost 4.4% for the month while the S&P 500 fell 4.2%. The Dow Jones Industrial Average lost 5%, according to IBD MarketSurge.
Much of the indexes' poor performance can be traced to higher inflation and stronger jobs data pushing back hopes of a rate cut. As indexes came under pressure, there were fewer time-tested trading strategies to employ.
Trading also slowed. Schwab's Trading Activity Index fell to 48.87 in April from March's 51.65. The Schwab Trading Activity Index captures investors' behavior and sentiment. It's calculated using the completed trades in millions of client accounts.
But as trading slowed, investors became highly selective in their stock picks.
Joe Mazzola, head of trading and derivatives strategist at Charles Schwab, found that clients preferred stocks "with compelling generative AI solutions" as uncertainty in the market increased.
Schwab Clients Bought Nvidia, Microsoft, Amazon
Schwab clients were big buyers of three Magnificent Seven stocks: IBD Leaderboard stock Nvidia, Microsoft and Amazon.com, the brokerage said Monday. In April, all three stocks fell, with Microsoft suffering the biggest loss at 7.5%. Amazon lost 2.8%.
Nvidia bottomed on April 19 and is now forming a cup base. Microsoft also is rebounding and forming a cup base. Amazon is near new highs after climbing back above its 50-day moving average.
In March, investors' stock picks were more diversified across the information technology, consumer staples and health care sectors, Schwab said.
Meanwhile, traders heavily sold Walt Disney, PayPal, Exxon Mobil and Warren Buffett-backed Occidental Petroleum in April. Investors sold PayPal ahead of earnings on April 30 and Exxon ahead of its first-quarter report on April 26.
Disney sold off 9.2% during April but is rebounding. PayPal, which rose 1.4%, tried unsuccessfully to break out on April 30. Exxon gained 1.8% while Occidental Petroleum rose 1.8%. Both are trending lower still.
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