Jay Woods, Chief Market Strategist at Freedom Capital Markets, joins to break down a volatile trading session marked by sharp sector rotation and shifting investor sentiment. Despite strong earnings from Nvidia, momentum faded as traders rotated into beaten-down software names like Salesforce, Snowflake, and Workday, while mega caps such as Microsoftand Meta also caught bids. Woods explains how this rotation is shaping index performance, with the S&P 500 hovering near key technical levels while the Russell 2000 continues to climb. He also highlights key levels to watch, including resistance near 7000 and support around the 100-day moving average, and discusses whether consolidation in big tech could persist ahead of earnings from Broadcom. Beyond tech, Woods points to strength in healthcare via the XLV ETF, with names such as UnitedHealth, Humana, Johnson & Johnson, Amgen, Pfizer, and Bristol-Myers Squibb showing renewed momentum. He also previews upcoming catalysts like CrowdStrike earnings and potential policy signals from the Federal Reserve, noting that while markets may tread water short term, sector rotation suggests underlying resilience rather than weakness.
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Joining us now is Jay Woods, chief market strategist at Freedom Capital Markets.
Well Jay, great to have you here.
Thank you so much for joining us.
Yeah, what an interesting bell.
I'm not a fan of that double ring.
As a trader, we listen to that bell and we go, but they're excited.
Yes, absolutely, Jay.
So.
First and foremost, a tale of two stocks, Nvidia versus Salesforce.
What's going on here?
Yeah, we had Nvidia, great earnings.
Results were fantastic.
Traded up after hours, looked like it was breaking out, and then the momentum faded.
Where did the momentum go?
They went to Bargain Shop, Salesforce, Snowflake, and then Workday yesterday.
Not great quarters, uh, you know, these AI disruptive stocks and software have been under a lot of pressure.
Investors are going to take a little more risk on and try to find bargains instead of go where, you know, the safety is in Nvidia.
So this market is showing sentiment is much different.
Than the fundamentals.
So the technicians are winning right now if you're looking for a battle, which I always have, and we're seeing a rotation into some beaten down names.
We saw Microsoft and Meta catch a bid too.
Those two names under pressure.
So rotation within the overall beaten down names and then the overall market, what does it do?
S&P 500 falls because of some of those mega caps, but You know, Russell up again today, so rotation continues to be the theme, and we saw it on display today with Nvidia.
Yes, so you mentioned a key word there, Jay, and that is rotation.
And on this Thursday afternoon we're closing above that 6900 level for the S&P 500.
So what levels are you watching in the short term?
6900 is just a magnet.
We go below it, we get back there.
We try to get to 7000.
We get right back down to 6900.
What am I watching?
That ceiling of 7000.
We know that it's that floor that gets a little higher.
It's the 100 day moving average around 6830 now.
We test it every time we tested it since last April, we've held.
Will it break?
Is Nvidia going to go a little bit lower or consolidate again?
I believe we'll consolidate again.
Now we focus on Broadcom next week.
It's, it's baby brother, if you will.
That stock under pressure held this 200 day moving average today.
Let's see if this consolidation phase in the big tech.
Continues.
That's not a bad thing as they go sideways.
The small caps rally.
It won't bring us to new highs, but it's not going to break us down yet.
So we're treading water right now, and sometimes that's not a bad thing.
Yes, and you brought up the small cap Russell 2000.
That is something that we'll continue to watch.
So what do you expect to see from that index and why?
Yes, well, the regional banks and the financials within that index have done very well.
Regional banks under a little bit of pressure, but what we see is.
Healthcare stocks within that group have done extremely well.
Overall, Healthcare is where the next rotation goes.
Utilities broke out.
Real estate, the REIs starting to break out.
And now watch XLV, the healthcare ETF.
We're seeing, you know, not the healthcare companies like UNH Humana do well.
We're seeing the big pharma do well, the J and J Amgen.
Now I'm seeing Pfizer come back to life.
Bristol-Myers breaking out smart, safer. good dividend that's rotation into safety, not what you want to see in a roaring bull market, but still bullish.
We're still holding on near all-time highs, so not a bad thing, but Nvidia couldn't break us out, and it may take a few more months before we see that 7000 plus level again.
And finally, Jay, before I let you go, you mentioned AI.
We're all focused on artificial intelligence.
So what do you make of the headlines we're seeing regarding disruption?
Do you think?
It's overdone.
It's so ironic.
AI bubble is being disrupted by what else?
AI, um, is it being overdone?
I think we saw it in the software style.
So when I look at the software, I look at the IGV as the proxy.
Some of these cyber names also a little oversold.
Watch CrowdStrike next week.
That's going to be an interesting tell.
So as software now catches a bid, the hardware is getting hit a little bit.
So more rotation just within the sector itself.
I think we're going to be OK, but.
Just not getting momentum in the sales of these software names over the long term.
In fact, what we'll watch next relief rally.
This is a relief rally.
Can it sustain?
I don't think it's going to, but you know, some things will change in the next few weeks and maybe the narrative will change.
We'll focus about Fed policy next.
That's probably the next thing that will move this market.
Well, Jay, thank you so much for joining us on this Thursday and thank you so much for weighing in on the latest earnings.
Thank you.