Stocks fell broadly Tuesday, and rallying value stocks underperformed growth. Observers say this trend won’t hold.
Stocks fell broadly, and safe havens were hard to find. Value and growth stocks both took lumps, although one slightly less than the other.
The Dow Jones Industrial Average fell 267.13 points, or 0.78%, to close at 34,060.66. The S&P 500 lost 35.46 points, or 0.85%, to end at 4,127.83, and the Nasdaq Composite dropped 75.41 points, or 0.56%, to close at 13,303.64. The biggest gainer in the S&P 500 was drugstore chain CVS Health (ticker: CVS), which saw shares rise 4.7% after announcing a new chief financial officer.
Shares of mature companies in their earnings prime—value stocks—struggled, which some see as a blip on the radar than a trend for the future.
“I would say it’s a breather,” Ian Gendler, executive director of Value Line Research, told Barron’s. “I don’t think it’s a any kind of trend.” Others agree. There is “some rotation out of recent winners,” wrote Dennis DeBusschere, head of portfolio strategy research at Evercore, in emailed remarks to the press.
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The Vanguard S&P 500 Value ETF (VOOV) fell 0.86%, and the Dow, stacked with value stocks, saw 26 of its 30 component stocks end in the red. Value stocks have outperformed growth since September. Since April 26, when growth stocks began their latest selloff, the value ETF is up 2.5%, while its growth counterpart (VOOG) has dropped 4.2%. Driving the disparity are investors who see the economic recovery continuing, contributing to powerful earnings growth for value firms in the near term.
Growth stocks didn’t take a back seat today, however; the growth ETF fell just 0.75% on the day, narrower than the value ETF loss. Also, the Nasdaq, which is loaded with banner growth sectors including tech and biotech, was in the green for much of the day.
“With the pullback in tech stocks over the past few weeks, it’s no surprise to see long-term investors looking to expand their positions in the sector, amid declining valuations,” wrote Brian Vendig, president of MJP Wealth Advisors, in emailed remarks to Barron’s.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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Why Did the Stock Market Fall Today? Value Took a Breather and Some Lumps - Barron's
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