One of the stock market's biggest Liberation Day losers is setting new records after crossing a key technical level
Getty Images / Spencer Platt
- Industrials were among the biggest losers from the trade war, but they're staging a comeback.
- Institutional buyers are pouring in and sector breadth is improving.
- This could signal a shift from defensive to cyclical stocks.
Industrials were one of the biggest losers of the Liberation Day stock market sell-off, but they've since made an impressive comeback.
The sector hit record highs at the start of the week after plunging over 20% in April. Since 1990, only two other periods have seen this level of price appreciation: immediately after the Great Financial Crisis and the pandemic.
Industrials are one of the most tariff-exposed areas of the economy. Companies in the sector often rely heavily on global trade and have thin margins that can be easily disturbed by import and export costs. The sector includes companies like GE Aerospace, Boeing, and Uber Technologies.
Increased confidence in the economy and trade negotiations, combined with strong performances from aerospace and defense stocks, helped carry the rally. Trump's recent announcement of a $175 billion investment into the Golden Dome missile defense system is also looking like a promising tailwind for the sector. Industrials is the first sector to break record highs after Liberation Day.
Institutional investors are buying into the rally, adding more fuel. According to Bank of America, for the week ending May 16, hedge fund net purchases of industrial stocks were at their highest level since 2008.
Bank of America
Additionally, 65% of the sector's stocks are trading above their 200-day moving averages, indicating that more stocks are participating in the rally, according to Adam Turnquist, the chief technical strategist at LPL Financial.
While "sector breadth has notably improved," it's still lower than what it was during previous record highs, Turnquist points out. When the sector was previously trading at all-time highs in late 2024, 80 to 90% of stocks were trading above their 200-day moving average.
The percentage of stocks in the sector hitting 52-week highs is also still low, at just shy of 9% this week.
LPL Financial remains neutral on the sector, but Turnquist acknowledges that the technical setup is constructive for a continuing rally — and could point to cyclical stocks becoming leaders in the overall stock market recovery.