The word of the week was "inconsistent." Stocks saw alternating days of strength and weakness as they wrestled with higher interest rates and fears of inflation.
Fed Chair Jerome Powell briefly calmed the market on Wednesday when the FOMC issued its policy decision, but things quickly turned ugly on Thursday when bonds acted like they hadn't heard a word he has said. After an ugly finish, stocks stabilized on Friday and had a nice finish on breadth of about 4,750 advancers to 3,000 decliners.
Two things have been complicating the action lately. The first is that there continues to be significant rotational action, with technology stocks suffering the most while groups like traditional retail, banks, and airlines benefit. This rotation is not smooth, and the excess is reversed from time to time.
The second issue producing obstacles is that when the market reacts to bonds, it creates some correlated selling. Stock-picking goes out the window, and the good, bad, and ugly are all sold regardless of their individual merits. Just when you think stock-picking is not going to work, it comes roaring back like it did on Friday afternoon.
It is wildly inconsistent, and that is playing havoc with many traders. Aggressive traders see much more volatility in their accounts, especially if they focus on small-caps as I do.
Hopefully, the market will start to digest the interest-rate issue and start focusing on the positive aspects of economic growth and $1.9 trillion in stimulus. There are plenty of interesting stocks and themes out there, and I'm confident that good traders will continue to do well.
Have a great weekend. I'll see you on Monday.