As the S&P 500 and Nasdaq got ravaged by a bear market and the Magnificent Seven stocks like Nvidia, Alphabet and Tesla sold off, Wall Street shifted funds into "boring" industries like insurance. Aon, Ryan Specialty and other insurance stocks notched record highs as Nvidia, Tesla and other titans sank below their key moving averages.
But now as the tech-heavy Nasdaq builds on a nascent uptrend, growth stocks have begun to rally as insurers retreat. The shifting market landscape puts a spotlight on rules for how to buy stocks and when to sell stocks. And the upcoming avalanche of earnings from the likes of Meta Platforms, Microsoft, Apple and Amazon.com will either enhance or impede this budding market rally in Big Tech.
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Aon Leads Sell-Off In Insurance Stocks
After rising to an all-time high in March, shares of insurance broker Aon hit resistance. The stock then retreated below its 50-day moving average to test support at its 200-day line. On Friday, Aon plummeted below that benchmark after reporting essentially flat earnings. Shares fell nearly 8%.
And Aon is not alone. Ryan Specialty has also taken a nosedive. The stock dropped over 7% as it crashed below its 200-day line. Brown & Brown, Baldwin Insurance and others in the insurance brokers group also got hit.
KIE, the SPDR Insurance exchange traded fund, is also down for the week. The KIE ETF tried, but failed to hold support at the 200-day line on Friday.
Recent struggles in the consumer staples sector reinforce the shifting market landscape. XLP, the Consumer Staples SPDR ETF, continues to get rattled by volatility. That came into focus in September after the ETF hit a new high. XLP now — once again — trades below its 50-day line.
While recent action is painful for investors in insurance stocks and consumer staples, it bodes well for an enduring market rebound as Wall Street shifts its focus — and funds — into growth stocks.
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Meta, Amazon To Set Tone With Barrage Of Earnings
As the market continues to build on this new rally, challenges remain. One test is the 10-week line.
After Alphabet reported Thursday, Google stock climbed back above that benchmark early Friday. But the search, cloud and artificial intelligence leader is now struggling to hold support at that line.
On April 22, Tesla missed on earnings, but Elon Musk made bullish comments about the robotaxi rollout. Tesla stock has just raced back above its 50-day moving average. Microsoft has just cleared that threshold. Now Amazon, Apple and Meta hope a positive earnings report can lift them above that line as well.
Meanwhile, Nvidia stock has locked down a four-day winning streak as it looks to retake its 50-day line. The AI juggernaut next reports on May 28.
So as the Magnificent Seven and other growth stocks perk up and the temporary spotlight on insurers like Aon and Ryan fades, investors should ready their watchlists. As with any nascent rally after a bear market, caution is king. False starts and failed breakouts do occur. So investors should use the principles of risk management as they look to take advantage of this emerging market shift.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
