It means the bulls will have to look to earnings for a way to keep the rally going. The S&P 500 hit an all-time closing high on Tuesday, but lately defensive stocks have been leading the charge, and notable growth indexes are slipping.
This rotation has many thinking the long-awaited market correction is nigh.
A three per cent decline in the Russell 2000 index last week seemed to be a confirmation of the trend.
Earnings season starts in earnest this week, with the highlight coming from JPMorgan Chase and Wells Fargo on Friday. Details on Wells Fargo’s earnings will be dissected for clues on the health of the housing market.
Overall, S&P 500 earnings are expected to have risen 1.5 per cent last quarter, down from a 4.3 per cent gain expected at the start of the year, according to Thomson Reuters data.
The Federal Reserve could be this week’s wild card. Indications of renewed support for lose monetary policy – or the slightest hint in the direction of tightening – have triggered wild moves in the market.
The minutes of the March FOMC meeting are due on Wednesday and market participants will look for insight into the debate regarding the amount and duration of bond purchases the US central bank is executing monthly.
The hawkish argument – a reduction of stimulus – was dented by Friday's job report, so any mention of it in the minutes may not trigger panic.
But more than a dozen speeches by various Fed officers this week could stir things up.