Brace for a Reshuffling of the Stock Sectors | By Ben Eisen |
Morning MoneyBeat is the Journal’s pre-market primer. To receive the newsletter via email, click here. |
Market Snap at 11/17/2017 08:25:25 AM ET |
S&P 500 Futures -0.02% ↓ 2584.5 | DJIA Futures -0.08% ↓ 23406 | U.S. 10 Year 2/32 ↓ 2.371% | WSJ Dollar Index -0.07% ↓ 87.27 | Crude Oil 1.56% ↑ $56 | Gold 0.31% ↑ $1282.10 |
Overnight Developments Futures pointed to a nearly flat open for the S&P 500 and stocks elsewhere in the world are also muted. The Stoxx Europe 600 was down 0.1% in recent trading, and Asian markets gave back some gains from early in their day by the closing bell. U.S. crude oil futures were trading up 1.5%, at $56.17 a barrel, boosted by fresh signs that Saudi Arabia plans to back an extension of OPEC’s deal to curb global production. |
The Breakfast Briefing It's not your father's stock index anymore. S&P Dow Jones Indices and MSCI Inc., whose indexes are tracked by trillions of dollars held in exchange-traded funds, rolled out a series of planned changes to their company sector groupings this week. That will impact where companies are grouped within benchmarks like the S&P 500, and could alter what stocks are held in certain industry-focused ETFs. The latest shifts reflect the way the corporate landscape has changed in recent years. Foremost, the index will update the telecommunications sector, which now looks like a relic of a past era. The telecom sector made up 9.8% of the S&P 500 in 1989, but has shrunk to a 1.8% weighting, according to S&P Dow Jones Indices. After a long period of consolidation, it holds just three companies. |
The telecom sector will be broadened to encompass communications. That means creating a new media and entertainment industry group within it that will inherit the media companies currently classified in the consumer discretionary sector. After the change, the current telecom stocks will be side-by-side with the likes of advertising, publishing and interactive media firms. There are a couple of other changes. Internet retail, a sub-industry within the consumer discretionary sector, will absorb some e-commerce companies that are currently in the tech sector. Also, the internet & software and services sub-industry in tech will be discontinued, with the companies being classified elsewhere. A new tech sub-industry called internet services and infrastructure will also be created in its place. More guidance is expected in January, when some of the affected companies are announced. The changes will go into effect next September. Some of those impacted may include the big tech firms, given the updates to the tech sector, analysts say. This could also change what sector-tracking ETFs hold, though it will be up to the ETF providers to decide how to account for those changes. The real estate sector's spin out from the financial sector may offer one template. At the time, the Financial Select Sector SPDR, the largest financial sector ETF, issued a special dividend to investors in the form of shares in a newly created real estate sector ETF. It remains to be seen how the sector shifts will impact investors, but it's clear index creators are trying to keep up with the times. |
Daily Factoid On this day in 1970, Stanford Research Institute scientist Douglas Engelbart obtains a patent for his X-Y Position Indicator for a Display System. Today, we know it as the computer mouse. |
Key Events 8:30 a.m.: Housing Starts for October [Consensus: 1.2 million; Prior: 1.127 million] U.S. housing starts are expected to fall in October for the sixth time in seven months. Single-family starts in the southern U.S. have slowed in recent months, driven by the effects of hurricanes Irma and Harvey. Housing-starts data are volatile and can be subject to large revisions. Starts in the first nine months of the year were up 3.1% from the same period in 2016. 8:30 a.m.: Building Permits for October [Prior: 1.215 million] Residential building permits, which can signal how much construction is in the pipeline, fell in September from a month earlier. Permits in the southern U.S. declined most, reflecting delayed projects as a result of hurricanes. 1:00 p.m.: Baker Hughes Oil Rig Count The U.S. oil rig count, a proxy for U.S. activity in the sector, rose in the prior week by nine to 738. After peaking at 1,609 in 2014, low oil prices pressured production and the rig count fell sharply. The oil-rig tally has risen over the past year. |
Stocks to Watch Shares of fashion startup Stitch Fix are expected to start trading on the Nasdaq Friday. The firm priced its initial public offering below its target range and sold fewer shares than planned. Tesla shares rose 3.1% premarket after Chief Executive Elon Musk revealed the company’s first all-electric semitrailer truck and a $200,000 super car. J.B. Hunt Transport Services said it has placed a reservation to purchase multiple Tesla semitrailer trucks. Shares of Twenty-First Century Fox climbed 5.9% before the opening bell. The Wall Street Journal reported after the market closed Thursday that Comcast has approached the media company to express interest in buying a substantial piece of it, while Verizon Communications and Sony have also considered acqu iring some of the firm's assets. The takeover interest comes after news last week that Walt Disney Co. recently held talks with the company but failed to reach a deal. Shares of several retailers surged premaket after the firms topped Wall Street's earnings expectations in the most recent quarter. Gap shares were up 9.2% following the clothing retailer's fourth consecutive quarter of same-store sales growth. Shares of Ross Stores climbed 7.7% after the department store chain beat expectations and raised sales projections for the current quarter. Foot Locker shares rose 21% after earnings and same-store sales came in ahead of analyst expectations. And shares of Abercrombie & Fitch were up 20% following its sales and profit beats. |
Today's Video | Play Video → The U.S. House passed a big multi-year tax cut and tax reform bill Thursday. The Journal's Gerald F. Seib explains the problems the bill may face in the weeks ahead. |
Number of the Day $7,998 The fresh record hit by bitcoin Friday morning in Asia, after the digital currency recovered from a slump of more than 25% over four days. Bitcoin has risen more than 700% this year. |
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