Wednesday, March 12, 2008

Financials and Real Estate Power Yesterday’s Rally

As the two graphics below depict, yesterday’s 400+ point rally in the DJIA was led by the financial and real estate sectors – two of the worst performing sectors over the past year and undoubtedly the two sectors that have suffered most from the US credit crisis.

I found it interesting that two cyclical sectors, basic materials and transportation, were also disproportionately strong during yesterday’s rally. While most of yesterday’s strongest sectors have been underperformers as of late, one sector where recent strength shows no signs of abating is oil and gas, where yesterday’s impressive performance was another instance of the rampaging commodities bull.

For an excellent longer term perspective on sector performance, I highly recommend Monday's Sector Strength analysis from fellow blogger HeadlineCharts.

In the first 40 minutes of today’s session, no sector has yet stepped to the front of the pack to provide the leadership needed to suggest that yesterday’s move has staying power, but the session is still young. Sector leadership in the coming days and weeks will have a lot to say about whether yesterday’s big move has legs, with financial and real estate stocks acting as an indicator species of sorts.


Unknown said...

So someone who had hedged a long SPX/market position with short XLF might have regretted that decision yesterday? :)

otoh the VIX dropped nearly 3 pts. on the rally, so too large a hedge with the VIX might also have caused regrets.

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