WHY IS WALL ST DOWN? IT’S A ROTATION, BABY
U.S. stocks fell for a second day on Wednesday with tech and artificial intelligence names leading the pullback. Citi strategist Scott Chronert says the drop isn’t worrying, but it does suggest a rotation is underway.
“If one is looking for a rotation trade, this is a good place to start,” he says, noting that a 5% drawdown is part of the normal course of market progressions and can happen without a clear catalyst. “A -10% draw down would require a more notable fundamental or macro catalyst,” he adds.
The Nasdaq 100 
NDX jumped 45% from April lows before falling 3.5% over the past two sessions, he writes. The S&P 500 
SPX rose 32% and is now off 1.5%. The equal-weight S&P 500 (.EWGSPC) S&P is up 24% and holding steady.
Chronert highlights gains in defensive sectors like real estate, staples, health care, and utilities, along with strength in energy, materials and financials.
“We have been viewing the S&P 500 as consisting of two parallel markets, namely the AI-affected and everything else,” he said. “Broadening… beyond the AI tailwind is a necessary condition of a healthy and higher index.”
Chronert isn’t the only one eyeing a potential rotation after tech’s strong run. For more, check out these recent blogs:
From war trades to peace plays: A rotation ahead?
“Stay nimble”: CPI could spark stocks rotation
BofA says ‘toppy’ sentiment to spark stocks rotation not retreat
After Wall St’s “unhealthy” rally, rotation is coming
(Danilo Masoni)
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