LIVE MARKETS-Truist upgrades financials, healthcare on signs of broadening market rally
XLF•Truist upgrades financials and healthcare
Truist analysts upgraded financials and healthcare stocks to "attractive" from "neutral," arguing that both sectors could benefit as the equity market rally broadens beyond technology and as investors seek lagging areas with improving momentum.
In a note out late Thursday, the analysts said both sectors were up only about 4% to 5% so far this year, less than half the gain of the broader S&P 500 .SPX, leaving room for catch-up performance. They added that both sectors recently broke above their early January highs, a sign of strengthening technical trends.
For financials, Truist pointed to a strong start to earnings season among major banks, improving share-price performance and a breakout to a new 52-week high following a lengthy period of underperformance.
"Financials should also benefit from a resilient economy and broader market participation," said the analysts led by Keith Lerner, Truist's chief investment officer.
Healthcare seen as defensive with improving technicals
Healthcare, meanwhile, could provide investors with a degree of defensiveness amid ongoing rotations within the market, according to Truist. The sector has lagged the S&P 500 by more than 50% over the past three years but now appears poised for a recovery as technical indicators improve. More than 80% of healthcare stocks are currently in intermediate-term uptrends, it said.
Technology remains the dominant current bull market theme with an "attractive" rating driven by strong earnings momentum and favorable price trends, the analysts said.
Truist also retained "attractive" ratings on energy and industrials. Energy has benefited from renewed Middle East tensions and improving price trends, while industrials continue to be supported by long-term secular growth drivers despite elevated valuations.
Among sectors with "neutral" ratings were communication services, materials, real estate and utilities. Consumer staples and consumer discretionary stocks were rated as "unattractive" owing to weak price and earnings trends, according to Truist.
