LIVE MARKETS-Truist downgrades industrials, citing lagging price momentum
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TRUIST DOWNGRADES INDUSTRIALS, CITING LAGGING PRICE MOMENTUM
Truist Wealth is downgrading the S&P 500 industrials sector .SPLRCI from "attractive" to "neutral," citing lagging price momentum and elevated valuations among other factors.
The firm says in a note that the sector still has some supportive long-term drivers, such as the buildout of technology/artificial intelligence and defense spending. Defense shares jumped after the late February start of the U.S.-Israeli war with Iran.
But other trends look negative. Price momentum is lagging, the firm notes, so unlike the S&P 500 .SPX, industrials failed to make a new high recently, which would be considered a negative divergence.
In addition, industrials' "forward price-to-earnings (P/E) of 25.5x is on par with tech, even while earnings trends are weaker. And its forward P/E premium to the overall market recently moved above 27%, the highest level seen over the past 30 years, before modestly pulling back," the firm notes.
Truist sees information technology .SPLRCT, energy .SPNY and materials .SPLRCM as attractive, while it has a neutral view on communication services .SPLRCL, real estate .SPLRCR, utilities .SPLRCU, healthcare .SPXHC and consumer staples .SPLRCS along with industrials. It sees consumer discretionary .SPLRCD and financials .SPSY as unattractive.
Industrials as a sector is up 12.3% for the year so far, behind gains for energy, materials and tech.
(Caroline Valetkevitch)
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