Stocks closed mostly higher on Friday and almost closed higher for the week.

After Monday's plunge, which saw the S&P down as much as -4.25% intraday, and the Nasdaq down -6.36% intraday, the markets made a stunning comeback, and by week's end the S&P was only down by -0.04% for the week, while the Nasdaq was only down by -0.18%.

Even though last week could have ended much worse, it still marks the fourth down week in a row for both the S&P and the Nasdaq. Although, it's only the second down week in a row for the Dow, the small-cap Russell 2000, and the mid-cap S&P 400.

Remember, the market rotation, which started 4 weeks ago, saw people rotating out of big-tech/AI stocks (which weighed on the S&P and Nasdaq), and into other stocks that were largely ignored during the Magnificent 7-dominated rally. That buoyed the Dow, the Russell and the S&P 400.

But everything got hit over the last 2 weeks. Although, that's why the big-tech exposed indexes took a bigger/longer drubbing than their smaller-cap or less tech exposed counterparts.

However, as I've mentioned when the market rotation began, this is not an abandonment of the large-caps, or big tech, or AI-focused stocks. I believe it's simply a lightening up of an over-crowded, over-allocated trade. But that 'trade' is not dead. Far from it.

It might feel like an abandonment at times (especially during the previous week and the beginning of last week due to the coincidental pullback and correction the market was/is going through), but again pullbacks and corrections are very common. And pullbacks (defined as a decline between -5% and -9.99%) happen on average of 3-4 times and year, and corrections (defined as a decline between -10% and -19.99%) happen on average of about once a year. This happens in every bull market. And I see this one as no different.

Pullbacks and corrections are also usually accompanied by great hysteria in the media, and it will feel like the bottom is ready to fall out of the market.

The previous bout was the banking crisis brought about by the SVB bank collapse last year. But that correction, which sent panic throughout the market, ended up running its course in a reasonably short-order, like it usually does, and it ushered in a historic rally in its wake.

I believe we are going thru the same thing now. But instead of a banking scare, it's the recession scare.

However, it's very difficult to make a case for a recession when the labor market and economy is still so strong, and corporate sales and earnings estimates are trending higher.

None of this spells recession.

So I think we are simply going thru a typical pullback and correction. It's not fun while it's happening. But these are usually pauses that refresh.

And if you know these are commonplace moves, instead of looking at them as places to sell, you can look at them as opportunities to buy before the next leg up.

This week will be another full week of earnings with 975 companies on deck to report.

And we've got a full docket of economic reports as well with the most watched ones being Tuesday's Producer Price Index (PPI) wholesale inflation report, and Wednesday's Consumer Price Index (CPI) retail inflation report.

Should be a busy week.

See you tomorrow,