Sector rotation

Friday’s market rebound offered a boost, but couldn’t erase earlier losses. The Nasdaq and S&P 500 ended the week down, while the Dow hit an all-time high, driven by a rotation into financials and industrials. Key themes included hyperscale cloud providers’ AI-driven capital expenditure plans, with Alphabet’s investments welcomed and Amazon’s facing investor scrutiny. Software stocks saw pressure amid AI competition fears, and sector rotation created opportunities in value and industrial names.

Retail investors, as measured by Schwab’s STAX, became net sellers in December, ending a period of outperforming the S&P 500. This shift was attributed to typical year-end portfolio adjustments, with modest overall volume. Technology and Consumer Discretionary sectors saw the most net selling. Despite market highs, retail trading focused on selling into strength and buying dips. Popular buys included Netflix and NVIDIA, while Tesla and Palantir were among the most sold.