NEW YORK – Economically sensitive areas of the US stock market are flashing warnings over growth, even as major equity indexes edge higher.
The S&P 500 is up 8.6 percent for the year after gaining 1.5 percent in April, thanks to roaring year-to-date rallies in shares of Microsoft, Amazon and Google-parent Alphabet and other growth and technology stocks that command heavy weightings in broader indexes.
Beneath the surface, however, areas of the market tied to economic sentiment such as transports, semiconductors and small-cap stocks dropped in April, while so-called defensive sectors are outperforming.
Investors cited growing caution among market participants faced with a thicket of concerns, from fears of a possible US default this summer to worries that the Federal Reserve’s aggressive monetary tightening could bring on a recession.
“People are starting to more defensively position themselves,” said Aaron Dunn, co-head of the value equity team at Eaton Vance. “The overall signal to me is there is still a lot of fear about recession and oncoming weakness in the back half of the year.”
Areas of the market showing cracks include the Russell 2000, an index populated by smaller, domestically focused companies, which was down 1.9 percent for the month. The Dow Jones Transportation Average, another bellwether of economic health, fell 2.9 percent. – Reuters
