The best and worst stock performers in Q3

Yahoo Finance's Jared Blikre breaks down some of the biggest winners and losers throughout September and in the third-quarter.

Video transcript

- Welcome back to Yahoo Finance Live. Let's head down to the New York Stock Exchange and check in with our very own Jared Blikre. Jared?

JARED BLIKRE: Hey, it's the end of the quarter, so let's talk about what's happened and what might happen in the following quarters. First of all, for the current quarter, I'm looking at some of the action in the various sectors. We're looking at gains of about 4% in the financials. In consumer discretionary, it's about 2%-- a little bit more for health care and then real estate. And then tech-- tech taking a little bit of a backseat, but still in the green, up about 1.8%.

But you take a look at what's happened over the last month, I believe only energy is in the green. And that says a lot about the current environment. There's been a lot of talk about taper, what the inflation expectations are. Finally, it looks like the COVID, the Delta variant and the COVID, all of that influence is ebbing.

And we've actually seen some pretty healthy gains in the travel sector for this month, which actually surprised me when I was checking it out on the Wi-Fi interactive earlier. We have a lot of gains in not only the airlines, but the cruise lines. So that was forward looking.

But I think I get back to the US dollar. You take a look at what's happened over the last few days, we've got a big break to the upside in the Dixie-- that's the DXY-- heavily weighted towards the euro and the pound. So it's not completely representative of, for instance, our trading partners, but nevertheless a good proxy.

Now, that has been shooting up because of interest rate differentials. We've had the 10-year yield rising, and that's in expectations that the Fed is going to raise rates eventually. Before that, it's going to taper. But a lot of that has been baked into the market right now. And the US dollar is responding.

Why is that? Well, we have foreigners who are seeing the increased rates in our 10-year. Once we hit levels that are big, round numbers like 1.5% or 2% in the 30 year, it will trigger automatic buying programs. So they will buy our treasuries. And to do that, they have to convert their-- whatever their local currency is into US dollars.

So if this trend continues, then it could very well-- since the US is probably one of the more hawkish central banks in the world-- if this continues, we're going to see continued pressure on some of the more sensitive sectors and industry groups and factors to the US dollar. Companies that have strong balance sheets, that should be fine. Everything is contextual.

When we have a global economy that's still recovering-- which it is-- even though the Fed is threatening to put the brakes, we're still growing right now. And that can continue for some time. So US dollar doesn't necessarily mean it puts the brakes on the stock indices or any movements that we're seeing in the stock market. But it is going to become a more stock pickers environment here. And there are going to be a lot more winners and losers. And the losers are going to be those companies with bad balance sheets, especially all those zombie companies.

I don't have the exact percentage on the tip of my fingertips, but something like 20, 25% of the Russell 2000 companies do not have enough income to pay their debt. And that's going to go-- that's not a sustainable situation when we have materially higher interest rates, which we're probably going to have in another year or two years. So there are going to be a lot of winners and losers to sort out here.

- Yeah, from both the dollar action and the Treasury action. Speaking of winners and losers, that's a good segue. You were talking about winners and losers on the quarter on the sector level. I've been looking at some of the numbers on the individual level, as well. I believe, if I'm recalling correctly, Moderna was the top performer in the quarter in the S&P 500.

JARED BLIKRE: Yeah, we've seen a few standout names. The vax stocks really took off. That kind of abated. But if you think back to a month or two ago, we had Moderna. We had Novavax. All of that was centered around the need for booster shots. So they got a nice boost themselves in the stock price from that.

In terms of the winners and losers over the quarter, I think one of the standouts for me is semiconductors. Those have really flagged over the last two months. They are still up considerably. The Philly Semiconductor Index is probably only 2% or 3% off of its record high. But nevertheless, I've been seeing some weakness not only in semiconductors-- and that is a bellwether for the entire tech industry, because it gets back to IT spending-- but also software. So those are two industries that I'm going to want to keep a close eye on, especially as a lot of the companies in there are growth-- they're not necessarily value oriented, which are the companies that would perform in a rising interest rate environment.

So all in all, going to be really interesting to see what happens in October. Just another quick stat here-- if October reclaims the losses in September, we tend to rally into the end of the year. So there's a little bit of seasonality in play there, too. October has had some of the steepest drop offs and some of the steepest market corrections and bear markets. And that kind of skews the averages here. But October usually a slightly positive month.

- All right. Well, I'm looking forward to it. Jared, bring on that Santa Claus rally, right?

JARED BLIKRE: In October, sure.

- All right. Jared Blikre, thanks so much.