Coca-Cola, Visa and Mastercard Hit Records as Investors Rotate Out of Chip Stocks

Dow Jones
1 hour ago

Chip stocks have fizzled, but investors are finding fresh highs outside tech. Call it the revenge of the old economy.

Coca-Cola, a quintessential consumer staples stock and longtime favorite of Warren Buffett and Berkshire Hathaway, hit a new all-time high this week. So did Visa and Mastercard, two top financials, as well as life insurance leader MetLife.

Over in the oil patch, ExxonMobil, Chevron, Shell and ConocoPhillips notched new all-time highs on Friday. Healthcare stocks Gilead Sciences, Thermo Fisher Scientific and McKesson recently hit record highs as well, as did consumer discretionary stocks Urban Outfitters, Williams-Sonoma and SharkNinja. (Chevron, Visa, Gilead Sciences and SharkNinja are all recent Barron’s stock picks.)

What’s missing? Tech—for the most part. Apple isn’t far from a new all-time high. But the shift away from momentum-driven chip stocks, which were surging thanks to expectations of even more big spending on AI by the top hyperscalers, is a sign that investors are largely shrugging off the sector’s slump. Chip stocks were on pace Friday to extend their losing streak to nine straight sessions.

“Rotation continues to be the theme,” said Michael O’Rourke, chief market strategist at JonesTrading, in a report Thursday. O’Rourke has been vocal about how concentrated the market is but added in his report that it is encouraging to see that the S&P 500 isn’t far from its record high despite the notable pullback in chip stocks.

Third-quarter earnings season, which kicked off in earnest this week with several reports from big banks and is set to continue next week with GE Aerospace, Netflix, Meta Platforms, Tesla and Procter & Gamble among the megacap highlights, could be another catalyst for a continued broadening of the rally.

Nicole Inui, head of equity strategy for the Americas at HSBC, said in a report that “unloved sectors,” such as financials, and consumer discretionary and real estate could get a lift if companies report better-than-expected earnings and offer upbeat guidance.

“U.S. economic activity continues to hold up better than expected,” Inui added. “Earnings leadership could broaden. That, in turn, would support wider participation in the market and an improvement in index breadth.”

Valuations also appear reasonable enough to spark a broader rally if earnings for companies outside tech and AI come in stronger than expected. The Invesco S&P 500 Equal Weight ETF is trading for less than 16 times earnings estimates for the next 12 months, a bigger-than-usual discount to the cap-weighted index.

“Robust earnings growth has remained widespread across the market this year and is even accelerating, which are facts investors may not fully appreciate,” said Mike Dickson, head of research at Horizon, in a recent report.

“As earnings come in over the next several weeks, many market sectors may perk up and join the rally. With many stocks below their highs, continued strong earnings growth across sectors could lift more stocks and help the broader market rise in the coming months,” Dickson added.

So investors who may be licking their wounds from the recent selloff in chip stocks should take some comfort from the fact that the rest of the market is starting to pick up the slack for semiconductors.

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