Today, March 11, 2009

Although NASDAQ was up 1% and the rest of the market was basically flat, the industry performance pattern from yesterday repeated itself again today.  The correspondence was perfect among the underperformers–utilities, healthcare, and services all fell in price.  Consumer staples were flat.  The outperformers changed up a little bit, though.  Technology and transportation were the strongest industries, joined by basic materials and consumer discretionary.  Financials were better than the market but not the stars they were yesterday.

Investors seemed a lot more selective today than yesterday.  Apple and Research in Motion outperformed their stogier brethren.  Goldman, Citi and JP Morgan were up,  GE was down.  Size didn’t seem to matter.  The EEM was flat.

Put the financials aside as a special case.  What strikes me about the past two days is the rotation away from defensives and into tech, transport and retailers.  At first blush, this shouldn’t be happening.  Other than reports of life out of tech companies in Taiwan, among them the semiconductor foundry TSMC–apparently some tech manufacturers went overboard in cutting orders in the final quarter of last year–the “best” economic news around seems to be that things aren’t getting much worse.  No hints yet of anything getting better.  

What could be happening is that investors are neutralizing some of their defensive exposure.  On the one hand, the past couple of months have shown the big weakness of consumer staples–exposure to the euro.  On the other, tech and consumer discretionary have fallen a very long way.  This doesn’t mean investors have turned positive on the economy or the market, just that they think there’s no more percentage in being as defensive as they have been.  

The rotation bears watching, though.  A few more days and it may begin to feed on itself.

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