Fundstrat strategist Mark Newton says declining crude oil prices are helping drive strength in several sectors that have lagged the broader stock market.

In a new interview on the Fundstrat YouTube channel, Newton says the recent improvement in a number of consumer and transportation stocks has coincided with weakness in crude oil, creating opportunities outside of technology.

“A lot of it’s just algorithm based and crude turning down. We’re seeing better strength out of the airlines, which is the biggest beneficiary of a drop in crude [oil].”

The strategist also says several retail stocks that struggled while the broader market pushed to record highs are beginning to stabilize and participate in the rally.

Newton points to companies such as retail giants Nike, Target, Best Buy and Home Depot, noting that they largely failed to keep pace with the market over the last year despite major indices reaching new all-time highs.

“Markets hitting new all-time highs, these stocks just weren’t participating. So now that’s slowly but surely starting to change.”

Newton says the recent strength has emerged over roughly the last week and a half and does not appear to be driven primarily by company-specific fundamentals.

The strategist adds that investors looking to diversify away from technology may want to pay attention to these areas as semiconductor and technology stocks become increasingly extended.

“That’s a very good sign for people looking for alternatives of where [to] put [their] Micron and Seagate [stocks]… technology stocks are getting a bit overbought potentially if you wish to diversify.”

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Fundstrat technical strategist Mark Newton says the US stock market is poised to broaden beyond semiconductors and memory stocks, warning that tech has gotten “over its skis” after an 18% rally in eight weeks and is likely to consolidate through the summer.

Speaking in a recent interview, Newton identified financials, industrials, consumer discretionary, and healthcare as the sectors best positioned to play catch-up as technology cools. He noted that the XHS healthcare services ETF recently broke to new all-time highs, calling it an encouraging sign that broadening is underway.

“I am optimistic that we can start to broaden out. I do suspect that technology is going to need to consolidate at some point in June and or July. Difficult to see an 18% rally in 8 weeks just continue at the same pace. It’s highly unlikely, and we’re going to need to consolidate.”

Newton said the overall market is not overextended, but many investors have been cautious amid a leadership transition at the Federal Reserve and lingering geopolitical tensions. He noted that investors who lack sufficient exposure to high-weighted semiconductor and memory names have struggled to keep pace with the S&P 500.

Newton said he is not bearish and expects the consolidation in tech between July and October to create buying opportunities heading into the midterm elections.

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