Upcoming earnings will determine whether the stock market rotation is here to stay or a one-day wonder

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There must be a belief that earnings will broaden out beyond a small group of megacap tech stocks.

You can call Thursday the "revenge of the diversified portfolio." With advancing stocks beating declining ones 6-1 on the New York Stock Exchange, it wasn't so much a negative on tech stocks day as it was a positive on diversification day, with strong rallies in cyclicals, interest rate sensitive and banks.

"Expectations are for the rest of the market to close the gap with megacap tech. That means that earnings are broadening out," Supriya Menon, EMEA head of multi-asset strategy at Wellington Management, said in an interview with Bloomberg TV. "When we look ahead, we see big-cap tech moderating in terms of the earnings they can deliver in the coming quarters." Bank of America's Savita Subramanian is also in the "broadening out" camp.

 

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