Market Winners Pummeled On Friday

Includes: DIA, IWM, QQQ, SPY
by: Bespoke Investment Group

The major indices finished higher on Friday, but many of the high-flyers that led the market during the rally off the lows in early February finished deep in the red. You can see the pummeling that recent winners took in the chart below. In the chart, we have broken up the Russell 3,000 (comprises 98% of US traded stocks) into deciles (10 groups of 300 stocks each) based on stock performance from the 2/3 market low through the close on Thursday (the 27th). The first decile all the way to the left of the chart contains the 300 best performing stocks in the index from 2/3 to 2/27, while the last decile all the way to the right contains the 300 worst performing stocks in the index from 2/3 to 2/27. We then calculated the average performance of the stocks in each decile on Friday.

As shown, the decile containing the best performing stocks during the rally from 2/3 to 2/27 declined an average of 1.32% on Friday! Remember, Friday was an up day for the market, and growth names (that led the market higher throughout February) typically outperform on market up days. The fact that they not only fell, but fell significantly, on a market up day is completely out of the norm, and it's certainly something to watch in the days ahead. Unless your portfolio is mostly made up of market laggards, chances are you had a rough end to the month. Whether it was due to month-end profit taking or it's the start of a new trend, we'll find out on Monday when trading begins for the month of March.