Stock markets will try to reverse the small bearish trends emerging. On Thursday, the Dow, Nasdaq, S&P 500 (SPY), and iShares Russell 2000 ETF (IWM) fell. Wall Street analysts are trying to frame a great rotation out of magnificent seven stocks into small-cap firms.
The abrupt sentiment shift will likely hurt small caps and encourage markets to find safety in the megacap firms in the mid-term. For now, expect companies of all sizes to face selling pressure. The chip sector (SOX) is a leading indicator of the economy. Its pullback suggests that markets expect that spending on technology will slow.
Ahead of the mini pullbacks in the last few days, investors already rotated into underperforming stocks. For example, investors sent homebuilder D.R. Horton near its 52-week high after it posted results. UnitedHealth (Unh) closed at $564.34, just 1.6% below its 52-week high.
UNH bottomed in April at $436.38, when a cyberattack led the firm to issue a revenue warning. In Q2, the firm affirmed its full-year adjusted earnings outlook. It is absorbing a $0.60 to $0.70 a share cost related to the attack. In addition, it will divert its funds toward a stock buyback, along with helping its care providers. This is the right thing to do. The stock is responding positively as a result.
