Stocks Closed Mixed Yesterday, Big Tech Rotation Weighed On Shares Stocks closed mixed yesterday with the tech-heavy Nasdaq down -1.43%, followed by the S&P 500 shedding -0.84%. The Dow was off moderately, giving up -0.34%. But the small-cap Russell 2000 and mid-cap S&P 400 were up 0.31% and 0.17% respectively. The headlines pointed to a rotation out of tech after some disappointing cloud and AI infrastructure signals. Microsoft, for example, tanked -14.6% over the last 4 days since they reported earnings last week, with analysts citing slowing cloud growth and rising CapEx. Of course, I would not write off tech. The AI boom is alive and well. And likely will be for years to come. But diversification into other areas that can benefit from the strengthening economy, without the massive AI spend, are looking like good bets. Also weighing on stocks yesterday was a decline in cryptocurrencies. Both Bitcoin and Ethereum were down about -7% intraday before bouncing by the close to finish with a more modest -2% and -1% loss. Big drops in other financial products like precious metals and crypto can often drag equities down with them since plenty of investors have exposure to those other investments. (FYI -- Gold and Silver yesterday were both higher. Although, it doesn't erase the sizeable drop that began late last week.) Reports that the U.S. shot down an Iranian drone that approached an aircraft carrier in the Arabian Sea didn't help, as it increases worries over escalating tensions between the two countries. On a positive note, the House passed the funding bills, and continuing resolution (CR), to end the government shutdown. The President signed it later in the afternoon. The fight over a Homeland Security bill will take place over the next 2-weeks, which is when the CR comes due. But for now, the shutdown is over, and that's one less thing for the market to worry about. In other news, yesterday's Job Openings and Labor Turnover Survey report (or JOLTS for short) showed 7.294 million jobs available vs. last month's 7.15M and views for 7.245M. Today we'll get MBA Mortgage Applications, the PMI Composite report, the ISM Services Index, and the ADP Employment report. Earnings season continues. Yesterday, before the open, Merck posted a positive EPS surprise of 0.49%, and a positive sales surprise of 1.33%. That translated to a quarterly EPS growth rate of 18.6% vs. this time last year, and a sales growth of 4.99%. They were up 2.18% yesterday. After the close we heard from Advanced Micro Devices, which posted a positive EPS surprise of 15.91%, and a positive sales surprise of 6.24%. That equated to a quarterly EPS growth rate of 40.4%, and a sales growth of 34.1%. They also upped their revenue guidance for Q1 above estimates. But the stock was down by -1.69% in the regular session before earnings, and down another -7% in after-hours following earnings. We'll hear from another 198 companies today, including Eli Lilly and Uber before the open, and Qualcomm, ARM Holdings and Alphabet (another Magnificent 7 stock) after the close. In spite of the recent volatility, the major indexes are within striking distance of their all-time highs. In fact, the Dow made a new all-time intraday high yesterday before closing lower. And the S&P made a new all-time high the day before. There's a lot to be excited about in the market this year. Just remember, there's volatility in every bull market. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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