Despite a losing week for the S&P 500, several stocks have surged into overbought territory, signaling potential pullbacks. Moderna and Merck saw significant gains following positive cancer vaccine trial results, with Moderna jumping 129% and Merck up 12%.
Estée Lauder also experienced a strong rally, up over 18% after exceeding earnings expectations and raising its fiscal 2027 operating margin outlook. Stocks like Agilent Technologies and Thermo Fisher Scientific also appeared on the overbought list.
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Even as the broader market experienced a downturn, a select group of stocks exhibited significant strength, pushing into overbought territory. The S&P 500 concluded its three-week winning streak, primarily due to rising Treasury yields that dampened market sentiment. The index saw a modest 0.4% gain on Friday but ultimately registered a 1.4% loss for the week. A surge in bond yields, particularly for longer-dated Treasurys, triggered a sell-off on Thursday, impacting the performance of major averages.
Utilizing LSEG data, CNBC Pro identified stocks within the S&P 500 exhibiting a 14-day relative strength index (RSI) above 70, a common indicator of overbought conditions, suggesting a potential for a market correction. Notable among these stocks were Moderna and Merck, both of which saw substantial share price increases following positive preliminary results from a late-stage trial of an experimental personalized cancer vaccine. The vaccine, when administered with Keytruda, met crucial endpoints in patients with higher-risk or advanced melanoma that had been surgically removed.
Moderna led the pack with a weekly surge of 129%, achieving an RSI of 70 and maintaining a hold consensus rating. Merck experienced a 12% gain for the week, with its stock showing an RSI of 77 and a buy consensus from analysts. Estée Lauder also entered overbought territory after a robust earnings-driven rally, with shares climbing over 18% for the week. The cosmetics company exceeded revenue and earnings expectations for its fourth quarter and raised its adjusted operating margin outlook for fiscal year 2027 to a range of 12.7% to 13.5%. Additionally, Estée Lauder projected adjusted earnings per share between $3.10 and $3.35 for fiscal 2027, aligning with the FactSet consensus of $3.19.
"For fiscal 2027, we are affirming our confidence to accelerate organic sales growth. In addition, we are raising our outlook for an even stronger adjusted operating margin, as we double down on our strengths to further diversify growth," stated Stéphane de La Faverie, president and CEO. Other stocks appearing on the overbought list included Agilent Technologies, which recorded the highest RSI at 79, and Thermo Fisher Scientific, with an RSI of 71. Both companies currently hold buy consensus ratings from Wall Street analysts.
