Breakout

Earnings and Risk Rotation Could Fuel the Rally

Breakout

In the dead of winter, three long months ago, the buzz on Wall Street was about the great rotation. This budding super-trend was not only calling for a massive movement of money out of bonds and into stocks, but was also being used as a crutch to justify otherwise inexplicable gains in the market.

Today, there's another rotation underway, only this time the money flow is moving out of defensive sectors and into cyclicals and other industry groups that have been lagging. It's a sudden shift in sentiment that Miller Tabak's Jonathan Krinsky calls, "the other great rotation," and a trend that could prove to be just what's needed to drive stocks to fresh highs.

And according to Peter Kenny, managing director at Knight Capital, as much as earnings season has been "lumpy and uneven with extremes on both ends," it is also fueling the movement of money.

"Earnings and guidance are helping that rotation out of the defensives and into the more risk-oriented or growth-oriented or alpha-oriented issues, and away from the Dow 30," he says in the attached video. He notes even small and mid-cap stocks are beating the Dow Industrials now too.

And it doesn't stop there. Over the past week, the Dow Utilities (^DJU) and Transports (^DJT), as well as the Emerging Markets (EEM), Nasdaq 100 (^NDX), Biotech (^BTK), Banks (^BKX), Semis (^SOX), Builders (XHB) and Gold (GLD) are all outpacing the industrials. In short, you'll be hard pressed to find very many benchmarks that aren't beating the Dow.

It's part of why veteran strategist Sam Stovall of S&P Capital IQ writes, "the inability by the bears to spark a thrust lower may be adding to the confidence of the bulls." While still cautious that this move could still prove to be an ''oversold bounce," Stovall's of the mind that "prices may be on their way for a test of the recent highs at 1,593 on a closing basis, and 1,597 on an intraday basis."

Rates

View Comments (53)

Recommended for You

  • U.S. SEC to pay $30 million-plus in largest whistleblower award

    By Sarah N. Lynch WASHINGTON (Reuters) - An anonymous tipster living abroad will be receiving more than $30 million, in the largest whistleblower award ever doled out by U.S. The Securities and Exchange Commission said on Monday that the whistleblower provided crucial information that helped…

    Reuters
  • Life Insurance Doesn't Have To Be Complicated

    We'll help you understand the basics. Create your personalized estimate with USAA Life Insurance Company. Life brings obstacles, We bring advice.

    AdChoicesUSAASponsored
  • Wall Street Has A New Worry Now That The Economy Is Recovering

    Business Insider is at the annual Bloomberg Markets Most Influential Summit on Monday, and this year  guest after guest has talked about the same worry. Early in the conference Carlyle CEO William Conway, hedge fund legend Julian Robertson, and William Dudley CEO of the Federal Reserve Bank of New…

    Business Insider
  • Apple sells more than 10 million new iPhones in first three days

    Apple Inc said it sold more than 10 million iPhones in the first weekend after its new models went on sale on Friday, underscoring strong demand for phones with larger displays. Chief Executive Tim Cook said the company could have sold even more iPhone 6 and iPhone 6 Plus models if supplies had…

    Reuters
  • Gold crashes and is now tarnished for good

    Gold shined brightly at the beginning of 2014, with bullion prices jumping by about 13% from New Year’s Day until mid-March. Last week, the precious metal settled near lows not seen since Christmas 2013.

    MarketWatch
  • After big gains, stocks Cramer would avoid

    If you're looking at these stocks due to chatter of a super-cycle, Cramer thinks you'll come to regret it. Because sand is such an important part of fracking , a relatively new drilling process that's made formerly hard to reach deposits of oil (New York Mercantile Exchange: @CL.1) and natural gas…

    CNBC
  • Top Analyst Upgrades and Downgrades: Auxilium, BofA, Genworth, MGM, Walgreen, Wynn, Yahoo and More

    Auxilium Pharmaceuticals Inc. (AUXL) was downgraded to Hold from Buy at Stifel. Genworth Financial Inc. (GNW) was written up in Barron’s over the weekend as having 80% upside potential. Las Vegas Sands Corp. (LVS) was downgraded to Market Perform from Outperform and the price target was cut to a…

    24/7 Wall St.
  • Ruble Falls on Brent Decline, Fed Concerns: Russia Reality Check

    Markets are reacting in real time to tension in Ukraine following Russia’s March incursion into Crimea and subsequent annexation of the Black Sea peninsula. The Micex Index fell 1 percent to 1,417.46 at 12:44 p.m. in Moscow, giving a loss since Feb. 28, the day before President Vladimir Putin ’s…

    Bloomberg
  • Enjoy this refreshing Triple Play offer!

    Get FIOS TV Mundo starting at $79.99/mo. w/ no annual contract + 2-yr. price guarantee. Or sign for 2 yrs. & get a $300 prepaid Visa. Click here.

    AdChoicesVerizon FiOS ®Sponsored
  • EMC Stock Soars After Investors Learn About Mega-Merger Talks With HP, Others

    For nearly a year, EMC and HP have been kicking the tires on a merger that would have created one the biggest enterprise tech companies on the planet — with over $130 billion in annual sales, according to the Wall Street Journal. Both companies were concerned they couldn't sell the deal as it was…

    Business Insider
  • Next up after Alibaba: Biggest bank IPO ever

    Investors will get a little time to catch their breath after Friday's record-breaking Alibaba trading debut, but not too long. On the heels of what is the largest initial public offering on record, Wall Street will be asked to digest what could be the largest bank or thrift IPO ever-the expected…

    CNBC45 mins ago
  • Russian Industrial Giant Facing Bankruptcy?

    One of Russia's commodity producers could get crushed under the weight of its debt. U.S.-traded shares in the producer of coal, iron ore and steel, Mechel (MTL), fell 30%. The Market Vectors Russia ETF (RSX)  fell 1.83% today. The  iShares MSCI Russia

    Barrons.com
  • 5 401(k) Gotchas to Avoid

    Between employer contributions and the ability to defer income tax on your own contributions, 401(k) plans often help you come out ahead in retirement saving. Here are five 401(k) pitfalls to watch out for: [See: 10 401(k) Facts Everyone Should Know.]

    U.S.News & World Report LP
  • US cracks down on companies moving overseas

    The Obama administration cracked down Monday on certain overseas corporate mergers and acquisitions, aiming to curb American companies from shifting their ownership abroad to shirk paying U.S. New regulations from the Treasury Department will make these co-called corporate inversions less lucrative…

    Associated Press
  • Linn Energy: No Surprise, Everyone Loves ExxonMobil Swap

    Last week, Linn Energy (LINE) arranged to swap some assets with ExxonMobil (XOM). On the heels of a positive take from Credit Suisse last week, two more analysts murmuring sweet nothings about the deal tdoay. RBC's John Ragozzino and team note that Linn's "portfolio high-grading strategy" continues…

    Barrons.com
  • Want a Career Change in Education? Earn your M.Ed.

    A Master of Education degree can help you launch a new career as a school administrator, curriculum director and more. Why wait? Apply to GCU!

    AdChoicesGrand Canyon UniversitySponsored
  • Alibaba becomes world’s largest IPO, but stock dives

    It’s official: Alibaba is the world’s largest IPO. The title was pretty much in the bag on Friday, when the Chinese Internet juggernaut raised $21.8 billion in a blockbuster public debut, and was on its way to $25 billion after the New York Stock Exchange said the underwriting banks would sell…

    San Jose Mercury News
  • The Debit Card Danger You're Probably Forgetting

    As the American economy sunk in the wake of the Great Recession, many Americans were forced to rethink their spending habits and tossed their credit cards overboard, reaching instead for the perceived safety of their debit cards. Debit cards protect you from yourself by limiting your spending to…

    U.S.News & World Report LP
  • SPIN METER: Those changing health law numbers

    Call it health care law numerology. The Obama administration has had to revise and refine some initial enrollment numbers for health insurance sign-ups after they turned out to be too optimistic. Parsing the numbers is a new pursuit for administration officials from President Barack Obama on down,…

    Associated Press
  • How to Play the Real-Estate Market

    Skimpy interest rates, pent-up demand and lower prices have sparked gains of about 20% in the median price of new and existing homes over the past two years. Select REIT Index—which covers a number of investment vehicles—has climbed about 150% since the beginning of 2009, roughly matching the…

    The Wall Street Journal
  • Blackstone to pull out of Russia

    US private equity group Blackstone is "giving up on Russia", highlighting how even well-connected western investors are shying away from doing business in the country. The New York-based buyout group has been frustrated in its attempts to find deals in the country since its co-founder Stephen…

    Financial Times
  • 25 Things To Know About Investing By Age 25

    Most of us are just in it to bulk up our savings for retirement, make a little extra money on the side, or even just beat inflation (more on that in a minute). ... but your retirement savings are. Retirement savings, on the other hand, are invested if you put them in a retirement fund like an IRA…

    Business Insider
  • Tax refunds will be cut for ACA recipients

    A significant benefit of the Affordable Care Act is the opportunity to receive money-saving tax credits up front to cut the overall cost of health insurance, but now hundreds of thousands of consumers could owe back some of that money next April.Those affected took advance payments of the premium…

    USA TODAY