Months in which so-called defensive industries lead the market have been a time to buy stocks in the past, according to data compiled by Birinyi Associates. The S&P 500 has returned an average of 11 percent in the 90 days after drugmakers, utilities, household-products producers and telephone stocks led the index by 5 percent or more for two months, data from 13 instances since 1960 show. During those rallies, technology makers, retailers and banks posted the biggest gains.
"Valuations are still reasonable and they won't preclude the market from doing well," said Larry Puglia, who runs the Blue Chip Growth Fund at Baltimore-based T. Rowe Group Inc., which oversees more than $500 billion. "Corporate earnings have been quite impressive, which is favoring stocks."