“This is a market in which a rotation is likely to continue into the end of the year,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. “Technology, consumer discretionary and communication services remain our favorite sectors for the long term … but I think near term, with signs of economic improvement on the horizon, we’re going to see cyclical companies outperform.”
Amazon shares were down 2.9% after falling 5% on Monday. Zoom Video dropped 5.2%, adding to its 17% decline from Monday. Alphabet and Microsoft lost 0.9% and 3%, respectively.
Names that would benefit from an economic recovery rose on Tuesday. Chevron and Exxon Mobil were up 2.6% and 1.5%, respectively. Boeing traded 6.6% higher.
“The ‘stay at home’ trade, which has led the market higher for most of this year, may be falling out of favor,” said Lindsey Bell, chief investment strategist at Ally Invest. “There’s still a good long-term case for tech, but it may not outpace the rest of the market like it has since March.”
Both the Dow and S&P 500 hit intraday record highs on Monday before closing well off those levels as weakness in the tech sector put pressure on the broader market.
While cyclical stocks led the market advance on Monday, the tech-heavy Nasdaq Composite fell 1.5% as investors dumped some of the popular stay-at-home plays such as Amazon, Zoom Video and Netflix. The Nasdaq finished Monday’s session near its session low.
Those moves were sparked by U.S. pharmaceutical giant Pfizer and German biotech firm BioNTech announcing their coronavirus vaccine was more than 90% effective in preventing Covid-19.
“The strong results from the Pfizer vaccine were better than most expected and means we could be opening back up sooner than expected,” said Ryan Detrick, chief market strategist at LPL Financial, “Coupled with an economy that continues to surprise to the upside and the stock market is now pricing in the prospects of a much better economy in ’21.”
Pfizer’s big vaccine news came as the U.S. topped 10 million cases of Covid-19, a bleak milestone just 10 days after reaching the 9 million mark amid a record surge in daily infections. Many on Wall Street believe a viable vaccine would be crucial for the economy on its road to a full recovery.