The so-called “stock market bloodbath” has continued on Friday with major indices falling down to the lows of the last October. What's going on?
Wall Street: traders lose interest in consumption
The index, tracking the dynamics of securities of consumer goods producers, the leader of decline among the main sectors of the S&P 500 this year, might sink even lower and become less attractive to market participants as a protective sector.
The sector, including suppliers of products protected from economic downturn, has lost 13% since the beginning of the year and it’s preparing to show an annual dive for the first time since 2008. At the same time the S&P 500 has risen by 1.7% since the beginning of the year.
Some financial analysts pointed out that they’re assured that the sector will be still pressured especially when investors have more attractive opportunities in other sectors.
Buyers prefer a more healthy and fresh food, which keeps consumers from buying semi-finished products. Care for their own health also hit tobacco companies, such as Altria, as consumers increasingly prefer to look for alternatives to cigarettes.
Moreover, traditional retail stores face fierce competition from such online retail giants as Amazon, which are pressuring suppliers of products, forcing them to suppress prices.
For instance, Procter & Gamble, the world’s number one consumer goods producer, posted gloomy quarterly outcomes in April due to pressure from troubled retailers, soaring transportation costs as well as raw material prices.
Besides this, at the moment, Wall Street actually expects a leap of revenue of the consumer goods companies in 2018 by 11.4% compared to 11.6%, as follows from the forecast of April 1.
Many investors stressed that they could be interested in this sector if the stock price drops to levels compensating the risks of investors from investing in this sector.
The consumption sector tends to feel much better in contrast with the rest of the market during the weakening economy because market participants rely on the fact that even if customers have to reduce their spending, anyway they’ll still purchase such must-have things as soap, toilet paper and staple food.
Besides coronavirus, other news has been driving the stocks of Apple, Wallmart and General Motors to the lower levels.
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