The concept of the biggest losers becoming the biggest gainers and the biggest gainers becoming the laggards has hit full stride on the street in the last couple of days. Beginning yesterday with the Fed rate cuts and continuing into today those stocks which had been beaten down so badly have outperformed, while those that had been the hottest high flying stocks out there have lagged the market.
Let's take a look at some examples of this from today's trading, starting first with the new found hot stocks, which were previously those seemingly being left for dead.
Newly found market leaders
- Pulte Homes (NYSE:PHM) Jumped 22% today on huge volume after losing 75% of its value in the past year.
- Lennar Corporation (NYSE:LEN) Gained 13.61% on triple its normal daily volume today.
- XL Capital (NYSE:XL) Gained 13.26% today after a strong showing yesterday.
- Blackstone (NYSE:BX) Gained 9.59% today, but has performed poorly since its IPO last year.
- BB&T Corporation (NYSE:BBT) Gained 11.9% today on the strength of the huge rate cut yesterday.
- Coach (NYSE:COH) Gained 6.18% today after being crushed in the past few months due to the economic worry and the worries that high-end retail was in deep trouble.
- Lowe's Companies (NYSE:LOW) Gained 6.11% today and has begun to perk back up after a long slow and steady decline about a year ago.
- Chico's FAS (NYSE:CHS) Charged higher by 10.15% today, but is down to $8.79 from a 52 week high of almost $28 per share.
Previous High flying stocks that have been grounded
- Potash (NYSE:POT) Fell 2.01% on the day and has recently backslid after outperforming the market for months on end.f
- Agrium (NYSE:AGU) Another in the agriculture sector that has done great, but has been hurt the last few days. It lost 2.7% today.
- Foster Wheeler (Nasdaq:FWLT) Fell 3.4% today and has had a significant pullback of late after huge gains in the past couple of years.
- First Solar (Nasdaq:FSLR) Fell almost 10% today despite the strong market. Solar plays have gone from the hottest of the hot to very out of favor quickly.
Obviously the biggest cause for these changes is the emergency rate cut from the Federal Reserve yesterday morning. If you notice the leadership areas the last two days have been financials, homebuilders, and retailers; all areas that benefit tremendously from such aggressive cuts. The caution here is that it doesn't necessarily mean that these companies are going to just snap right out of their issues in no time. In fact, the homebuilders are probably in the worst shape of those sectors, and I'd steer clear of them until we see some sign that housing could perk back up.
Why then are the hot stocks falling? Generally in capitulation it is the hottest of the hot stocks that get hit hardest at the end, and that is exactly what is happening now.
Will this continue? It may over the short run, but look for those hot areas to perk back up in the long run since the growth in these areas is terrific.
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