Breakouts: S&P 500 Sorted by Proximity to 52-Week Highs

The benchmark US index is facing geopolitical obstacles to breaking new all-time highs, and just ahead of earnings season, that could give stocks a new push. Stocks near year-highs are concentrated in certain sectors, which could signal a shift in market dynamics.

Ten S&P 500 Near 52-Week Highs and Monthly Gains

1. Bank of America (BAC), +11%
2. Coca-Cola (KO), +6%
3. Dominion Energy (D), +6%
4. Johnson & Johnson (JNJ), +15%
5. Monster Beverage (MNST), +8%
6. Healthpeak Properties (DOC), +10%
7. Fifth Third Bancorp (FITB), +10%
8. U.S. Bancorp (USB), +12%
9. Citizens (CFG), +9%
10. Edwards Lifescience (EW), +9% 

A Defensive Rotation Resumes?

The S&P 500 has posted more modest growth over the last month than in the second quarter. Most recently, US stocks have come under pressure after US President Donald Trump implied that the ceasefire with Iran was over, shaking investor confidence that the geopolitical situation was normalising. Although the US said its retaliatory strikes were over, the market is still awaiting Iran's response and whether the situation will escalate. If that happens, it could cap recent stock gains, which have relied on hopes that lower energy prices will support the economy.

The S&P 500's gains over the last month have relied heavily on tech stocks, but traders have already expressed concerns about stretched valuations amid market expectations that the Fed will tighten this year. The resumption of the rotation out of tech stocks into more defensive investments could be a defining dynamic for the index in the coming months. Notably, among the stocks nearest to 52-week highs, there are no tech names. Semiconductor stocks have recently pulled back, suggesting they may be near the top of the cycle, prompting investors to look to non-AI base stocks. Another notable pattern is the dominance not just of banks, which are typically considered reliable investment choices, but also of financial institutions that will unofficially kick off the upcoming earnings season. Investors might be expecting these firms in particular to surprise to the upside, which might explain some of the recent moves.

Big Banks Lead the Sector

Bank of America, Fifth Third, and US Bancorp are all set to report earnings next week, and they are among the strongest performers amid broad strength in the banking sector. Banks and other financial institutions generally stand to gain as interest rates rise, and the Fed's hawkish pivot at the last FOMC meeting has left markets pricing in over an 80% chance of a rate hike this year. Bank of America and Fifth Third particularly stand out for their M&A activity, with the former interested in Fiserv and Fifth Third recently completing its takeover of Comerica. Traders will be closely watching these two companies' earnings to gauge the potential impact of the deals on their growth.

Consumer Staples Signal Stability Focus

Coca-Cola and Johnson & Johnson are also set to report earnings next week. Besides that, there is no specific catalyst for either, but they are considered the leaders in the consumer staples sector, which typically attracts investors during periods of high inflation. Investors looking for stability and brand strength would likely prefer established companies like Coca-Cola, which has global pricing power.

Monster Beverage, Monster Sales Growth

The only stock near 52-week highs that isn't about to report earnings is Monster Beverage. Technically, it's a consumer staple like Coca-Cola, but its niche status in the energy drinks sector makes it more speculative. The stock has performed well since reporting earnings in early May, with sales jumping 27% year over year. The company continues to expand its international presence and is seeing gains from its distribution partnership with Coca-Cola (and the latter's performance also might have provided tailwinds).