So far this year, cyclical industries such as oil suppliers, fertilizer, transport and steelmakers are leading IBD's 197 industry stock groups. That reflects confidence in the U.S. and global economy as well as benefits from the Trump tax cuts. The corporate tax cuts are likely to benefit energy and other old-economy sectors more than tech giants that can more easily avoid taxes.
[ibd-display-video id=3037819 width=50 float=left autostart=true] While 2018 has barely gotten started, most of these groups have been top performers over the past several weeks. Investors need to be watching for sector rotations so they are always focusing on the leading groups and stocks.
Many of the stocks in these groups are either extended from breakouts ( FedEx ( FDX ), U.S. Steel ( X )) or still recovering from long downtrends ( Schlumberger ( SLB )). But a few, including steelmaker Nucor ( NUE ) and Sociedad Química y Minera de Chile ( SQM ), are in or near buy range.
S&P 500 futures rose 0.25% vs. fair value. Nasdaq 100 climbed 0.3%. Dow futures advanced 0.2%.
The Chemicals-Agriculture group has soared 13% so far in 2018. This includes fertilizer makers such as CF Industries (CF).
But Sociedad Química y Minera de Chile, which makes specialty fertilizers, is also now seen as a lithium play . Sociedad Química y Minera has a 63.90 buy point, closing Wednesday at 61.81. The relative strength line, which tracks a stock's performance vs. the S&P 500 index, is lagging somewhat after a strong three-month uptrend to late September.
Mining giant Rio Tinto (RIO) reportedly has dropped out of the bidding for a 32% SQM stake owned by Nutrien (NTR), Bloomberg reported late Wednesday, citing sources. Fertilizer giant Nutrien, formed from the merger of Potash Corp. and Agrium, agreed to sell the SQM holdings to win regulatory approval.
Scotts Miracle-Gro (SMG) is now viewed as an indirect legal marijuana play .
Oil & Gas-Field Services
This group is up 8.7% this year. Group giants include Schlumberger and Halliburton (HAL). Crude oil prices have risen to three-year highs above $63 a barrel in the U.S. But oil services stocks were slower to rebound than many shale producers as customers remained reluctant to step up spending. Both Schlumberger and Halliburton on working on the right side of long, deep consolidations.
Oil & Gas-Machinery/Equipment
This related energy group has climbed 8% in 2018. Notable members include Baker Hughes, a General Electric Co. (BHGE).
This small group, dominated by FedEx and UPS (UPS), has rallied 8% as well. FedEx and UPS stocks are extended.
Steelmakers have climbed 7.9% this year. Steel stocks were among the big immediate winners after President Trump's election, but then made little headway for most of 2017 before moving higher in Q4. U.S. Steel and Steel Dynamics (STLD) are extended, but Nucor is just in range from a 66.10 entry in a consolidation going back nearly 10 months. Nucor's relative strength line, though improving, is still well off its December 2016 peak.
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