Investing

When Utilities and Defensive Consumer Stocks Lead the Market Higher

On a day that the Dow Jones industrial average is up 0.9% and the S&P 500 is up about 0.9%, and when the S&P 500 keeps hitting new all-time highs, it feels somewhat odd that utilities and consumer defensive are the two top leading sectors. That is the case on Wednesday, September 2, 2020. This may be a sector rotation of the market darlings of 2020 finally giving up some ground, and those funds are rotating into some of the more defensive positions.

One issue to consider is that the stock market all-time highs are happening while the economy is still rather bad. Also, August just saw its best monthly performance for that month dating back to 1986. Another concern may be that the month of September is generally deemed to be a weak month for the stock market. The Stock Trader’s Almanac even specified that the S&P 500 has been down nine of the past 12 first trading days for the month. And we have a high degree of uncertainty around the coming election, now just about 60 days away.

The reality is that the utility sector should continue to have strong earnings if the Federal Reserve is going to keep interest rates low for an extended period without much care over inflation. The money is flying out of Apple Inc. (NASDAQ: AAPL) now that the stock split euphoria has started to wear off as it should have. Note that Apple’s value also surpassed the value of the entire FTSE 100 and reached the same level as the S&P 500 Energy, S&P 500 Utilities and S&P 500 Materials Sectors combined.

24/7 Wall St. has compiled how each of the best stocks from each sector within the S&P 500 is leading the market. We have included the 52-week trading ranges and the consensus analyst target prices from Refinitiv on each.

Exelon Corp. (NYSE: EXC) led the utilities higher as the top gainer within the sector. Exelon was up 4.3% at $37.91. Exelon’s 52-week range is $29.28 to $50.54 and it has a consensus analyst target price of $46.75. Its yield is 4.2%.

NextEra Energy Inc. (NYSE: NEE) was trading higher by 4% at $288.10, with a market cap of $141 billion. It has a 52-week range of $174.80 to $289.41 and a consensus target price of $284.87. The largest utility by market cap comes with a 2% dividend yield.

NiSource Inc. (NYSE: NI) was the top gas utility with a 3.5% gain to $22.15, but with a mere $8.5 billion market cap. It has a 52-week range of $19.56 to $30.67 and a consensus target price of $26.25. NiSource comes with a 3.8% dividend yield.

SJW Group (NYSE: SJW) is not a member of the S&P 500, but it is the largest percentage gainer over American Water Works. The stock was up 2.7% at $63.20, with a $1.8 billion market cap and a consensus target price of $72.60. Its 52-week trading range is $45.60 to $74.99.

Brown-Forman Corp. (NYSE: BF-B) was the leader in booze with a gain of 10% to $80.50. Brown Forman’s earnings drove the gains and it has a 37 $ billion market cap and a 52-week range of $44.68 to $83.40. It has a consensus analyst target price of $63.33 and a dividend yield of just under 1%.

Coca-Cola Co. (NYSE: KO) was the leader in non-boozy beverages with a 3.75% gain to $50.96. Coca-Cola has a strong 3.3% dividend yield with its leadership and status in the Dow that comes with a $218 billion market cap. Coca-Cola’s 52-week range is $36.27 to $60.13 and it has a consensus analyst target price of $53.55.

Church & Dwight Co. Inc. (NYSE: CHD) was the top gainer in consumer products with a gain of 3.3% to $98.54. Church & Dwight has a $24.3 billion market cap and a 52-week range of $47.98 to $98.81 with that high also being seen today. It has a consensus analyst target price of $92.73 and a dividend yield of just 1%.

PepsiCo Inc. (NASDAQ: PEP) may be considered the same as Coca-Cola by some, but its snack-foods business kept it more defensive in the minds of some investors. Shares were up by 2.2% at $142.30. Pepsico’s shares have a $197 billion market cap and a 52-week range of $101.42 to $147.20. It has a consensus analyst target price of $146.86 and a dividend yield of 2.9%.

Newell Brands Inc. (NYSE: NWL) must have become enraged after we named it one of the 11 stocks that have refused to participate in the rally. Its stock was up 2.1% at $16.06 in mid-afternoon trading. Newell has a dividend that screens at more than 5% due to how much it sold off in the past. It has a $7 billion market cap and a 52-week range of $10.44 to $20.99. Newell’s consensus analyst target price was $17.30, but this was a $50-plus stock back in 2017 before its woes came into play.

Clorox Co. (NYSE: CLX) was leading among the larger consumer products companies, with Clorox bleach and cleaning products selling so well, and it saw a gain of 1.95% at $224.38. Clorox has a $28.3 billion market cap and a 52-week range of $144.12 to $239.87. It has a consensus analyst target price of $221.23 and a dividend yield of 2.0%.

Costco Wholesale Corp. (NASDAQ: COST) was the leadership stock among the big-box retailers. It was up 1.8% at $357.89. Costco Wholesale has a $158 billion market cap and a $340.58 consensus analyst target price. Its 52-week range is $271.28 to $359.06 and a 0.8% dividend yield.

When general indexes surge on a given day, it has recently been the technology and market leaders carrying the indexes higher. This could be the start of that long overdue rotation, or it could just be another one of those times where a breather is needed.