By Steve Goldstein, MarketWatch
It has been quite a run for stocks, and on Tuesday the S&P 500 briefly topped the 3,000 level and its 200-day moving average.
Perhaps what was more interesting was the composition of the rally. Value stocks in particular did well, with the S&P 500 value index /zigman2/quotes/210599986/delayed XX:SP500V +1.82% surging 2.5% while the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.05% rose 1.2%. The small caps also enjoyed stellar gains, with the Russell 2000 /zigman2/quotes/210598147/delayed RUT +1.70% jumping 2.8%.
The S&P 500 value index has dropped 17% this year and the Russell 2000 has lost nearly the same, while the S&P 500 has slipped a more modest 7%.
But some of the big coronavirus plays are losing momentum. Software company Zoom Communications /zigman2/quotes/211319643/composite ZM +2.36% , drugmaker Moderna /zigman2/quotes/205619834/composite MRNA -3.63% , streaming service Netflix /zigman2/quotes/202353025/composite NFLX +8.07% and tech giant Amazon /zigman2/quotes/210331248/composite AMZN +0.55% all have, if not declined, at least stopped rising, notes Julian Emanuel, chief equity and derivatives strategist at BTIG.
He says that is cause for concern.
“We’d suggest that the ability for the broad market to build on its recent gains is contingent on names like Zoom, Moderna, Netflix and Amazon and other highflying ‘shelter-in-place’ names whose momentum has waned in recent days, to at least sustain their meteoric advances as leadership passes off to the more cyclical areas and themes,” Emanuel said.
In a follow-up email, he says their strength is important since they have been the market leaders. “They don’t necessarily ‘need’ to hold their ground per se. But because they have been the market leaders, we are making the point that for the overall market to continue to advance, at minimum these stocks need to hold their ground.”
Don’t blink, though — London-based strategists at J.P. Morgan Cazenove say the rotation into value and cyclical stocks won’t last longer than four to six weeks. “Bond yields and oil price are unlikely to sustainably move higher, therefore they will not confirm the rotation, and some of the pent-up demand driving a normalization in [purchasing manager indexes] is likely to be exhausted soon, especially as the lingering negative impact of labor market dislocation starts to bite,” say the strategists led by Mislav Matejka.
The U.S. is considering a range of sanctions to punish China for its crackdown on Hong Kong, Bloomberg News reported , citing people familiar with the matter.
European Central Bank President Christine Lagarde said the eurozone economy is likely to contract along the lines previously outlined in the bank’s medium-to-severe scenarios, ruling out the “mild” possibility. The severe outlook is for a 12% gross domestic product decline and the medium scenario is for a 8% drop, while the mild was for a 5% drop.
Amazon.com is in talks to buy autonomous driving technology company Zoox for less than the $3.2 billion valuation the firm achieved in its last funding round, according to The Wall Street Journal .
Senate Majority Leader Mitch McConnell said on Tuesday that there would “likely” be a fifth coronavirus relief bill “in the next month or so,” according to The Hill .
The Federal Reserve’s Beige Book of economic anecdotes is due at 2 p.m. Eastern.