Stocks looked set to end the week on a positive note but selling hit in the last hour of trading and took the wind out of the bulls' sails.
Breadth ended up around even with the DJIA leading the pack primarily due to strength in Caterpillar (CAT) , Boeing (BA) , and UnitedHealth Group (UNH) .
The week started with an extremely strong move on Monday in the FATMAAN names that drove the Nasdaq and Nasdaq 100 ETF (QQQ) to solid gains of 2.5% and 3%. There was talk that this rise was driven by a "gamma squeeze" similar to what had occurred back in early September. However, there was no follow-through.
Money rotated back into small-caps later in the week, resulting in some strong pockets of speculative action although the indices mostly struggled. There were mild signs of rotation back into "value" names but that did not gain much traction.
Earnings season started this week but it was lackluster as money center banks had mostly poor responses to the news. Next week things will pick up quickly as a variety of sectors start to report and we will have a better sense of overall expectations.
Most notable this week was that news of surges in Covid-19 cases in both the U.S. and Europe had little impact. Also, the market shrugged off the lack of progress by Congress on a fiscal stimulus deal. Meanwhile, economic news has been a bright spot with better-than-expected retail numbers, although there are concerns that the pace of the improvement may slow.
Overall the price action remains generally good, stock-picking is still working and there hasn't been any major correlated selling. While the potential for landmines during earnings season is high, the technical action is still bullish.
Have a great weekend.
