Stocks seek leadership as 2018 winds down

Investors are trying to determine whether the recent decline in tech stocks is a blip or a shift in market leadership.

  • By Lauren Pollock and Peter Santilli,
  • The Wall Street Journal
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The stock market's recent retreat has been led by fast-growing technology companies that some investors fear won't be able to continue boosting sales at the same pace in a rising-interest-rate environment.

Investors have been weighing whether those declines are a temporary blip or mark the beginning of a broader shift in market leadership. Some are hopeful positive trade developments could offer relief, while others are recommending investors embrace more defensive stocks, like consumer-staples, utilities and health-care shares, known for their steady earnings and dividends.

Outsize market swings are expected to continue in the final weeks of the year as global growth rates slow and investors position ahead of the Federal Reserve's December meeting, where an interest-rate increase is widely expected.

Some of the stocks that have driven the S&P 500's (.SPX) modest gain this year have been among the biggest drags on the index in the fourth quarter.

Advanced Micro Devices Inc. (AMD) is the best performing stock in the S&P 500 this year but has recently tumbled on worries about slowing semiconductor demand. Meanwhile, heart-device maker Abiomed Inc. (ABMD) has tumbled since presenting results of a study that didn't exceed investors' elevated expectations. Netflix Inc. (NFLX) has faced concerns about slowing subscriber growth and rapidly growing content costs. And Amazon.com Inc. (AMZN) has reported record profits this year, but its sales growth is cooling, partly due to its Whole Foods acquisition and steeper competition in cloud computing.

Other stocks, including TripAdvisor Inc. (TRIP), Red Hat Inc. (RHT), Walgreens Boots Alliance Inc. (WBA) and Starbucks Corp. (SBUX), have held on to their big gains, despite the recent market tumult.

TripAdvisor has benefited from robust growth in its business that focuses on tours, restaurants and activities, while Red Hat surged after International Business Machines Corp. agreed to acquire the software-and-services company for about $33 billion. Meanwhile, Walgreens has benefited from higher prescription volumes that have lifted pharmacy sales, and Starbucks continues to log increased sales thanks to higher prices and new store openings.

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