• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

Rotation Is the Key Issue as Earnings Season Starts

The reaction to earnings from the big banks this week should give us some insight into market sentiment.
By JAMES "REV SHARK" DEPORRE
Apr 12, 2021 | 06:51 AM EDT
Stocks quotes in this article: GS, JPM, BBBY, WFC, XLF

Earnings season starts this week when Goldman Sachs (GS) , Wells Fargo (WFC) , JPMorgan Chase (JPM) , and Bed Bath & Beyond (BBBY) report on Wednesday morning. It is primarily financials on the docket this week before technology names start to report the following week.

With the major indices at all time highs as recent inflation fears have subsided, there is some concern that the indices are technically overbought. Fed Chairman Powell offered some market-friendly comments last week, but the market is still skittish about how a surge in economic growth will impact interest rates.

The critical issue for the market going forward is rotation. Since mid-February, big-cap technology and FATMAAN names have regained their leadership. The speculative small-caps that were leading a frenzy of buying to start the year have gone to sleep and are lagging badly. Sectors like biotechnology and SPACs have been struggling to find technical support.

The social media traders that were dominating the action for a while have lost their energy, but since big caps have regained leadership, it has not been apparent in the indices. The question now is how earnings season is going to impact this rotational action. Will the gap between big and small caps continue to widen, or will it shrink? If it shrinks, how will that occur? Will small-caps play catch up to the upside, or will big caps show some relative weakness?

The reaction to earnings from the big banks this week should give us some insight into market sentiment. The SPDR Select Sector Financial ETF (XLF) is lurking at all-time highs and is trading mainly in tandem with the major indices. Higher interest rates are not a negative for this sector, especially if the yield curve steepens.

If banks do see some 'sell the news' reactions to earnings, will that cause a broad market reaction, or will it cause rotational action to occur? With the economy on the brink of a significant spurt in growth, the likelihood is for rotation rather than broad, correlated corrective action.

This market has been much tougher on stock pickers recently, but we need to keep slogging along and see what works. If we can stay a step ahead of the rotational action, we will be in good shape.

We have a slightly negative start to the week.

(Wells Fargo is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells WFC? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, James "Rev Shark" DePorre had no position in the securities mentioned.

TAGS: Earnings | Economic Data | Investing | Markets | Stocks | Trading | Banking

More from Investing

Remember, Overbought and Extended Aren't the Same as Bearish and Broken Down

Bob Byrne
Aug 18, 2022 8:30 AM EDT

There is not sufficient technical evidence to assert that Wednesday's decline in stocks was the beginning of a severe decline.

Sloppy Wednesday, Parsing Retail Sales, Dissecting Fed Minutes, Shiny Apple

Stephen Guilfoyle
Aug 18, 2022 7:36 AM EDT

Plus, we check out how the market is handicapping future rate hikes and the latest GDP guesstimate out of the Atlanta Fed (it's lower again).

Take Advantage of Market Irrationality With This Stock

Paul Price
Aug 18, 2022 7:00 AM EDT

ACCO brands is a hidden gem with a 4.38% yield that you can own at a crazy low valuation. Let me show you how to play it.

Corrective Action Is Developing and Is Putting Bulls to the Test

James "Rev Shark" DePorre
Aug 18, 2022 6:32 AM EDT

We soon will see how much bullish support there really is.

Suddenly, a Fear of Heights on Wall Street

Helene Meisler
Aug 18, 2022 6:00 AM EDT

Sentiment anecdotally shifted on Wednesday. Let's take a look.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:23 PM EDT STEPHEN GUILFOYLE

    We're Cleaning Out This Retailer From the Bullpen

    Check out the latest moves in TheStreet's Stocks U...
  • 10:24 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    To Improve Your Trading and Investing, Spend More ...
  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login