The S&P 500 is flat because the market rally takes a breather

US stocks held steady on Tuesday as the market’s rally paused in February.

The Dow Jones Industrial Average and S&P 500 have barely changed after a six-day winning streak. The Nasdaq Composite rose 0.3% to hit a new intraday record high. Facebook and Netflix each gained more than 1%, while Microsoft and Alphabet were also in the green.

The Russell 2000 rose 0.2% to another record high, extending a strong rally into the new year. The small-cap benchmark is up more than 16% in 2021, outperforming the S&P 500’s 4% gain as investors amassed in shabby value names.

Investors could take some chips off the table after a strong rally fueled by optimism for a smooth reopening as part of the Covid vaccine rollout. Cyclical sectors that had performed better in the past few weeks drove the declines. Energy fell 2.4%, reducing its month-to-date gains to 10%. Finances and materials were also lower.

“The market has priced in reopening optimism, and in the short term, that could keep us going,” said JJ Kinahan, chief marketing strategist for TD Ameritrade. “What worries me a little is whether the reality of the economy is living up to expectations. Expectations are just so high that you wonder when we will get there, what’s next for us.”

Bank of America said a market correction could be in sight as the recent ramp-up showed signs of overheating, but this will be a buying opportunity for stock investors.

“We expect a buyable correction of 5 to 10% in the first quarter as the big unknowns coincide with excessive positioning, record stock offering and such a good earnings correction,” said Jared Woodard, investment and ETF strategist at Bank of America. said in a note.

Washington lawmakers appear to be approaching another law on economic relief. The House Democrats on Monday revealed the details of a relief proposal that included direct checks worth $ 1,400 with faster exit options than previous bills. Many believe that additional stimulus could help propel the stock market higher.

“The outlook for stocks just keeps getting brighter for the near future,” Tom Essaye, founder of Sevens Report, said in a note. “The stock-positive formula of massive (and unwavering) support from the Fed + massive new fiscal stimulus + the decline in COVID and the increase in vaccine distribution is getting more real, and stocks are rebounding as a result.”

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