Artificial intelligence has redefined the way certain industries operate within the Industrial sector, leading to notable advances in aerospace & defense, construction & engineering, and manufacturing. Why does this matter for investors? It makes companies more efficient and allows management to focus on profits and company goals. In aerospace & defense, AI is used in flight operations to analyze weather and air traffic data. Sensors also run predictive analytics that identify potential problems with an aircraft. In defense, AI provides tools for strategic decision-making, threat monitoring, and cybersecurity. Indeed, when defending against cyber-attacks, technology can learn patterns and create improved layers of protection. In construction and engineering, AI can optimize the design process, using advanced algorithms and simulations to identify the best configurations and optimal product performance. AI also has capabilities to efficiently allocate resources on a construction site and anticipate potential risks. The technology can provide real-time insights that help in negotiations with suppliers, task organization, and risk prevention. In manufacturing, AI solutions are analyzing production data and demand forecasts to streamline production schedules and resources planning. It is also improving the effectiveness of order-management systems to decrease fulfilment lead times. Studies by McKinsey have concluded that machine downtime can be reduced by 30%-50% and quality costs can be decreased by 10%-20%. Others have predicted that AI in manufacturing will be a $21 billion market by 2028. The following is a list of Argus BUY-rated stocks in the Industrial sector that are leaders in the use of AI.

Value stocks -- a market segment that includes high-yield stocks -- outperformed growth stocks in 2022. That's a recent rarity, as for the past decade-plus, the performance record has favored growth. But in 2022, The rollout of COVID-19 vaccines gave a lift to some of the cyclical companies (energy and regional banks) that had lagged in recent quarters, and value stocks outpaced growth stocks that year. While growth stocks have retaken the lead since 2023, the Federal Reserve continues to keep interest rates high to fend off inflation. This could possibly cap multiple expansion for growth companies in coming quarters. In any event, the value sector is the place to achieve income.

Lockheed Martin is the world's largest defense contractor and has dominated the Western market for high-end fighter aircraft since it won the F-35 Joint Strike Fighter program in 2001. Lockheed’s largest segment is aeronautics, which derives upward of two-thirds of its revenue from the F-35. Lockheed’s remaining segments are rotary and mission systems, mainly encompassing the Sikorsky helicopter business; missiles and fire control, which creates missiles and missile defense systems; and space systems, which produces satellites and receives equity income from the United Launch Alliance joint venture.

Thursday was an ugly day for the major stock indices, the first since August 7. The S&P 500 (SPX) gave back 0.9% and the S&P 100 fell 1%, while the Nasdaq and Nasdaq 100 (QQQ) took the brunt of the selling, dropping 1.7%. Smaller stocks held up better, with the S&P 400 off 0.8% and the S&P 600 down 0.9%. The NYSE fell only 0.4% and NYSE breadth wasn't bad at -1,370. NYSE advancers/total issues and NYSE up volume/total volume weren't terrible at about 28%. Real Estate was up 0.5%, with Financials rising 0.4% (led by life insurance and property & casualty stocks). Mega-cap JPM propelled the banks. On the downside, Information Technology fell 2.4%, led by weakness in semiconductors as the SOXX ran out of gas at its 50-day average. Software was weak and also failed at its 50-day. Consumer Discretionary fell 1.8%, dragged down by TSLA. If we do see downside price action, the first cluster of support for the SPX is near 5,500 -- the location of the rising 13- and 21-day exponential averages, the 50-day simple average, and a minor 23.6% retracement of the recent rally. There is an open gap at 5,463, while a 38.2% give-back targets 5,443 and a 50% retracement is at 5,382. For the QQQ, a little chart support sits near 474 -- also the location of the 50-day moving average. A 23.6% retracement of the rally comes in at 471; a 38.2% giveback is at 462 and near the unfilled gap at 465; and a 50% retracement lies at 455. After the torrid advance, it would not be surprising to see some consolidation/cooling off as overheated sentiment and market breadth need a reset. (Mark Arbeter, CMT)