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The S&P 493 is finally joining the S&P 500’s rally

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The Nasdaq (^IXIC) tacked on another 1.2% Thursday, notching a sixth straight day of gains.

With AI hype capturing investor attention, tech is in focus. But the broader S&P 500 (^GSPC), which managed to outperform the Nasdaq Thursday, shows that the 2023 rally is finally showing signs of broadening to the less techy sectors, like retail, materials, and industrials.

A motley “reopening” mix of cruise lines, car manufacturers, and industrial names are now joining the newly minted bull market, surging since the last jobs report two weeks ago.

The top winner since the jobs report is Carnival (CCL), up 35%, which can be seen in this chart below at the far right edge.

United Rentals (URI), an industrial rental and leasing stalwart, was in the red by 5% prior to June and has surged 20% since then. Caterpillar (CAT), which had been down 13% before the jobs report, is up nearly 20% since then, bringing its year-to-date return into the green.

Feel free to throw Etsy (ETSY), Southwest Airlines (LUV), Deer (DE), and General Motors (GM) into a similar boat, though not all have turned positive on the year.

Now, close on the heels of Carnival are shares of Norwegian Cruise Line (NCLH) and Tesla (TSLA), both returning 20% or more over this short period. And to be fair, these particular stocks were already sitting on material 2023 gains.

But the key point is that other beaten-down names have joined the rally.

The big catalyst for this surge higher was the May jobs report, whose headline payrolls beat Wall Street expectations for the 14th time in a row — seemingly at odds with the Fed’s blistering rate-hiking campaign.

Stocks surged on the announcement, showing little concern the Fed would be forced to ramp up its hawkish tone once again. And after a relatively tame Consumer Price Index report on Tuesday, the Fed delivered a pause to investors Wednesday, standing pat on interest rates — even if it all but promised more hikes to come.

It seems that good news is once again good news — which is what everyone fretting about the year’s gains being concentrated in a handful of the largest stocks have been desperate to hear.

So what’s not working? Many defensive health care and consumer staples names are dropping. Humana (HUM), Campbell Soup (CPB), UnitedHealth (UNH), Kraft Heinz (KHC), and General Mills (GIS) are among those sitting on the biggest losses this month.

The losses aren’t huge (Humana is the worst, down 12% in June). But they are significant, given the broader markets have been ripping hard.

All told, stocks are signaling a return to normalcy after a decidedly uncharacteristic and narrow start to this bull market. Myriad headwinds remain for stocks in 2023, but investors can finally take the “concentration” risk off their list of worries.

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