The good news is that there isn't any downside follow through to Friday's very poor action. The action on Friday was so poor that Investors Business Daily shifted its Market Outlook to 'Uptrend Under Pressure.'
The bad news is that we have very chaotic and choppy action. The stocks that did well on Friday are lagging today while the big losers are bouncing. Overall breadth is now running around 5570 gainers to 2300 decliners, but even though the indices have big gains, there are only 126 new highs.
The market is trying to sort out what higher inflation and interest rates will mean going forward. If growth wasn't so strong and if there wasn't such a tight labor market, then we would be hearing about stimulus and not tightening. We have a good economy, and there are going to be plenty of stocks that benefit from the fact. High interest rates do shift valuation, but that can be offset by better growth.
Despite the strength in the indices, the action in the stocks on my screens is mixed. There is somewhat similar to what happened in February when value names led while growth and speculative small-caps struggled. The action is not that severe, but my small-cap screens have about even breadth, and a few names are suffering from a lack of bids.
This is a market that is undergoing a transition to a higher growth/higher inflation environment. It is going to take some time to sort out the winners from the losers. That is what we see today, and that is why the action appears to be so inconsistent and choppy.