Market Rotates Into Growth Stocks as Russell Rebalancing Awaits

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The action looked sleepy Thursday morning as the market digested a second day of testimony from Jerome Powell, but things heated up in the afternoon. Breadth was not that great, but there was a strong afternoon ramp, and there was very aggressive rotation out of oil and commodities and into high P/E growth names.

The VanEck Oil Services ETF (OIH) was hit by a loss of 5.5%, while the ARK Innovation ETF (ARKK) jumped around 7% as names such as SnowFfake (SNOW) , Coinbase (COIN) , Ginkgo Bioworks Holdings (DNA) , and Roblox (RBLX) jumped higher. Biotechnology also had a very strong day, with the S&P 500 Biotech ETF (XBI) rising over 6%.

This rotational action is probably due in part to the rebalancing of the Russell indexes that takes place Friday at the market close. There are trillions of dollars in stocks that will be impacted, and it is likely to be the highest volume day of the year for the stocks in the Nasdaq and Russell indexes.

One of the big shifts that is taking place this year is a reshuffling of bigger-cap names between “value” and “growth” indexes. That is probably what caused some of the rotational action Thursday.

It is refreshing to see more aggressive trading action in higher volatility stocks, but it may not be all that meaningful.

I will have more details on the rebalancing Friday morning.

Have a good evening. I’ll see you Friday.