The stock market started the second quarter with heavy selling. The S&P 500 index dropped by more than 2%:
Technology and consumer discretionary stocks led the sell-off, including Intel (down -6.07%), Amazon (down -5.21%), Netflix (down -5.10%) and Facebook (down -2.75%).
Not surprisingly, mutual funds with large holdings in these names declined the most today:
Investors were selling other high-risk assets too, such as biotechnology shares:
With the dollar no longer falling versus the major currencies, international investments in Europe and Asia are becoming less attractive, as well:
Remarkably, all sector funds closed down today. In our view, this rare occurrence may signal a significant shift in investor sentiment towards a more bearish stance.
The momentum rankings of Fidelity sector funds show that the defense sector and some sub-sectors of technology are the strongest relative to other sectors:
Furthermore, the charts below show that both the Fidelity Select Defense and Aerospace Fund (FSDAX) and the Fidelity Select IT Services Fund (FBSOX) stayed above their respective 100-day moving average.
We use the 100-day moving average to assess the direction of seasonal, or intermediate-term, trends. The only other Fidelity sector fund that is above its 100-day moving average is the Fidelity Select Utilities Fund (FSUTX):
Overall, in our assessment, most sectors that make up the U.S. stock market are turning bearish in the short to intermediate-term timeframe, which could lead to further downside risk.