Live Markets-Oppenheimer flags S&P 500 correction risk, bearish on consumer discretionary

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Oppenheimer sees a risk of a seasonal pullback in the S&P 500 .SPX to 7,000 and said investors seeking downside exposure should bet against consumer discretionary stocks rather than semiconductors.

The brokerage said the benchmark index continues to consolidate below its early-June high, with positive market rotation offset by seasonal headwinds that typically persist through the third quarter. While it sees potential for a correction, Oppenheimer views any weakness as a buying opportunity ahead of what it describes as the strongest nine-month stretch of the U.S. presidential cycle.

Despite a recent pullback in the semis space, Oppenheimer argues that semiconductors remain one of the market's strongest long-term trends and that trying to time exits and re-entries could prove costly. Instead, Oppenheimer said it has greater conviction in selling consumer discretionary stocks, maintaining that the sector's relative weakness remains intact.

Even if the broader market rebounds sooner than expected, lower-momentum consumer names are less likely to recover as quickly as higher-momentum areas such as semiconductors, it added.

"The consumer rollover is not over," the strategists wrote, describing recent gains in the sector as a tactical rally to sell.