The S&P 500 ended up closing down about 0.50% today but still remains within 3% of its record high in July.  The chart below shows where each of the S&P 500’s Industry Groups are trading with respect to their own 52-week highs.  While the S&P 500 is less than 3% from its high, the majority of Industry Groups are down at least 5% from their own highs.  Leading the way to the downside, Energy has been the clear loser with a decline of 27.3%.  Behind Energy, just two other groups (Transportation and Autos & Parts) — which are both cyclical in nature — are down over 10%.  In terms of Industry Groups that have held up the best, they are mostly defensive in nature with Utilities, Food & Staples Retail, Consumer Durables, Telecom Services, and Real Estate all trading within 2% of their respective highs. Start a two-week free trial to Bespoke Institutional to access all of our research and our popular interactive Chart Scanner and Trend Analyzer tools.

After falling nearly 40% from its high point to its low point in the fourth quarter of 2018, Apple (AAPL) has come roaring back in 2019.  Earlier today the stock got within one percent of making a new all-time closing high.  You can see the action in the five-year chart for Apple below.  (Click here to view an interactive chart of AAPL.)  Start a two-week free trial to Bespoke Institutional to access all of our research and our popular interactive Chart Scanner and Trend Analyzer tools.

Apple (AAPL) has been the big winner of the mega caps over the last few months.  Below is a chart showing the total return of the five largest S&P 500 stocks since the S&P made its most recent closing low on June 3rd.  As shown, Apple has gained 32.5%, which is more than double the next biggest winner — Alphabet (GOOGL) at +16.5%.  Microsoft (MSFT) is up 15.1%, while Facebook (FB) is up 9.6% and Amazon (AMZN) is up just 2.5%.

Apple’s (AAPL) recent gains have put the company back in the “trillion dollar market cap” club as well.  Right now the club only has two members — MSFT and AAPL.  While Microsoft (MSFT) still holds the title of “World’s Largest Company,” Apple is now hot on its heels.

Amazon (AMZN), Alphabet (GOOGL), Facebook (FB) and Berkshire (BRK/B) are the only other companies with market caps above $500 million, and then you have JP Morgan (JPM), Johnson & Johnson (JNJ), Visa (V), and Walmart (WMT) rounding out the top ten.

Stocks got a shot in the arm at the end of last week thanks to the Nonfarm Payrolls report. As we discussed in Friday’s Bespoke Report, although the headline number missed expectations, the report’s data showed strength in other labor market metrics such as the employment-population ratio and wage growth.  With its business closely tied to the labor market as a payroll and HR solutions provider, the second-largest payroll accounting firm behind only Automatic Data Processing (ADP), Paychex (PAYX) outperformed on the day with a 2.17% rally. More significantly, this rally helped to lift PAYX out of a downtrend that has been in place since June.  It was also the first time that the stock closed in overbought territory (at least one standard deviation above its 50-day moving average) since June.

In addition to the more positive technical set-up, PAYX has an attractive dividend that currently yields 2.98%.  That is a much larger yield than other stocks in the Software and Services industry group, averaging 1.7%, and the broader S&P 500. The yield for PAYX’s closest comp, Automatic Data Processing (ADP), is nearly a full percentage point lower at 1.99%.  Though they have much smaller market caps, other comparables including Paycom Software (PAYC) and Paylocity (PCTY) do not pay a dividend. In terms of security, PAYX has a long history of paying a dividend going back to 1988 and has paid shareholders for each quarter consecutively over the past five years. The dividend has grown 63% (from $0.38 in 2014 to $0.62 last quarter) in this time.  The first two quarters of 2013 did not see a dividend declared but this was the only time this happened in the past three decades.  The payout ratio is currently 84.15%, which is somewhat high but in line with the average for the ratio over the past ten years. The next payout is expected to be declared on October 10th at $0.62 per share.

Moving back to technicals, below are price charts of PAYX’s competitors.  While PAYX managed to break its downtrend on Friday, none of these did and they’re still well off their recent highs. Start a two-week free trial to Bespoke Institutional to access all of our research including our interactive tools.

For much of the last several years, semiconductors have been a leading group of the broader market to both the upside and downside.  Therefore, it shouldn’t come as too much of a surprise that the S&P 500 has rallied off its earlier lows after the semis opened the day right around the unchanged level and have rallied from there.  The chart of the Philadelphia Semiconductor Index (SOX) over the last year also bodes well for the overall equity market.  Since its late May lows, the SOX has carved out a solid uptrend line with a series of higher lows, and while you have to squint closely, it has also made two higher highs relative to its high in April.  Also, just today the group is looking like it is close to breaking its short-term downtrend that has been in place since the most recent marginal new high in early September.  If that short-term downtrend breaks, the rally in the broader market will likely continue to have legs. Start a two-week free trial to Bespoke Institutional to access all of our research and our popular interactive Chart Scanner and Trend Analyzer tools.