The stock market has stumbled out of the gate early in 2024. But investors can look to positive earnings reports during the fourth quarter. That may reinstill confidence through the rest of the year aside from rate cut expectations. That said, there are certain sectors to watch that will allow traders to make short-term moves.
“At this very early stage, the fourth quarter earnings season for the S&P 500 is off to a weak start,” a FactSet Earnings Insight report noted. “The percentage of S&P 500 companies reporting positive earnings surprises is at average levels.”
However, it’s not all doom and gloom for corporate earnings when looking at specific sectors. At the top of the earnings expectations is the communications sector. The utilities and consumer discretionary sectors follow that.
“The Utilities sector is expected to report the second-highest (year-over-year) earnings growth rate of all eleven sectors at 33.7%,” the report said. “At the industry level, 4 of the 5 industries in this sector are expected to report year-over-year earnings growth. Three of these four industries are projected to report double-digit growth: Electric Utilities (59%), Independent Power and Renewable Electricity Producers (42%), and Gas Utilities (15%).”
Given this, traders may want to take a look at the Direxion Daily Utilities Bull 3X Shares (UTSL ). That extra juice from the triple exposure could amplify profits should the utilities sector witness even more upside in 2023. That’s especially so if a safe haven scramble takes place if the U.S. economy enters a recession.
UTSL seeks daily investment results equal to 300% of the daily performance of the Utilities Select Sector Index. The index includes companies from the utilities sector. That includes the following industries: electric utilities; multi-utilities; water utilities; independent power producers and energy trades; and gas utilities.
Traders Will WANT This Exposure
Expectation of coming rate cuts could cause consumers to start spending again. In turn, this should prop up the consumer discretionary sector.
“The Consumer Discretionary sector is reporting the third-highest (year-over-year) earnings growth rate of all eleven sectors at 22.9%,” the report said. “At the industry level, 3 of the 9 industries in the sector are reporting (or are expected to report) year-over-year earnings growth.”
That said, traders may want to keep an eye on the Direxion Daily Consumer Discretionary Bull 3X ETF (WANT ). It provides 300% exposure to the Consumer Discretionary Select Sector Index (IXYTR). The index includes domestic companies from the consumer discretionary sector. Those include the following industries: media; retail (specialty, multiline, internet & catalog); hotels, restaurants & leisure; textiles, apparel & luxury goods; household durables; automobiles; automobile components; distributors; leisure equipment & products; and diversified consumer services.
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