Technology shares headed for their fifth drop in the past six weeks as perceived safe-havens in US equities continued to gain favour on Wall Street.
Utilities and consumer staples, long considered defensive plays, were among the best-performing sectors in the S&P 500 this week, with investors girding themselves against slower economic growth and waiting on the Federal Reserve. Utilities were on pace to advance 0.9 per cent. Consumer staples — a group that features Walmart, Coca-Cola and Colgate-Palmolive — rose 0.7 per cent.
The consumer discretionary and communication services sectors led the index with gains of 2.4 per cent and 1.3 per cent, respectively.
Meanwhile, chipmakers heaped downward pressure on technology shares, particularly after a dim outlook from Broadcom stoked fears over the fallout from the US-China trade spat. That offset weekly gains for major tech stocks like Apple, Amazon, Alphabet and Facebook.
The tech sector was nursing a 0.2 per cent weekly decline. The Philadelphia semiconductor index, which tracks 30 chip companies, headed for a 1.7 per cent drop.
Defensive stocks have gained favour on Wall Street as escalating trade tensions and mixed economic data have led to an uncertain outlook for the global economy. Those worries, combined with soft inflation growth, have led investors to bet the Fed will lower interest rates this year, potentially as soon as officials’ July meeting. Investors expect the central bank to hold firm at its policy meeting next week, according to the CME’s FedWatch Tool, which tracks fed funds futures.
Rising expectations for rate cuts have boosted the appeal of stocks offering robust dividends, such as the utilities sector, which is up 3.4 per cent this quarter. The benchmark 10-year Treasury yield fell nearly a basis point on Friday to 2.0821 per cent to sink further from its 2019 high of around 2.78 per cent.
Materials and consumer staples have each advanced about 4 per cent since the start of April, trailing only financials. Real estate shares have also posted solid gains, up 3.4 per cent, with mortgage rates slipping to their lowest level since September 2017.
The real estate sector has claimed the second-best performance in 2019 among the S&P’s 11 sectors, rising 20.6 per cent this year, although was at a record high on Friday. Tech stocks still lead the pack, however, rising more than 22 per cent.