This week as we've straddled the end of the first half and the beginning of the second there's been some wild rotational activity. This isn't uncommon around this time of year but is likely being magnified by stretched positioning dynamics. A rotation out of the high-flying momentum trade, especially chip/memory, and into lagging areas like software, hyperscalers, healthcare, financials and even crypto got off the mat.

That reversion trade may have been lined up anyway but there's been some news flow helping to send the fast money to the exits- Meta and Softbank potentially selling excess compute capacity, for example. Neoclouds/nuevo HPC entrants sold off sharply along with AI hardware/chip names. As we head to print the S&P 500 is up just over 1% for the week while small/midcap indices are giving back some of last week's outperformance. Defensive/yield oriented sectors which also outperformed last week are giving some of that back.

The other big story this week was the labor market data culminating with this morning's BLS Employment report, which showed some cooling in the labor market after a string of very strong job reports. Overall the report was disappointing, but this could just be some balancing out of data after a couple of surprisingly strong readings.

Markets are closed tomorrow and the calendar is light next week- the calm before the earnings storm makes landfall the following week. The ISM Services report will headline the economic data. The FOMC minutes should be interesting since it will cover Warsh's first meeting as Fed chair. Warsh is also expected to announce the heads of the various Task Forces he's standing up to review the broad scope of Fed operations. Is there a task force for creating the task forces? The NATO summit could produce some geopolitical headlines. Earnings will include EPAC, LEVI, PEP, PGR, H and DAL. Enjoy the holiday weekend!