The Nasdaq climbed 1.2%, a good follow-up after Friday’s bullish price reversal. But a late swoon cost the index nearly half its gain for the day, a sign that the stock market’s confirmed uptrend remains delicate. The composite closed just below its 50-day moving average after peeking above it earlier in the day.

The S&P 500 added 0.7% and also lost some ground late in the day. In the short term, the index has found support at the 21-day exponential moving average.

U.S. government bond yields on the long end of the yield curve eased Monday, taking some pressure off growth and technology shares. The benchmark 10-year Treasury’s yield was 1.68% late Monday after reaching 1.75% last week.

But small caps lagged. The Russell 2000 fell 0.9%. Often this year, the Russell 2000 has moved along with the Nasdaq. But on Monday, the two indexes diverged.

Much of the weakness in small caps was in regional bank, consumer discretionary and energy stocks.

Financials, Energy Drag Stock Market

Those sectors were broadly lower, not just among small caps. Financial Select Sector SPDR ETF (XLF) fell 1.7%. Energy Select Sector SPDR ETF (XLE) lost 2%.

Volume fell on the Nasdaq and NYSE, though it would have taken extraordinary trading to surpass Friday’s witching-heavy volume. The once-per-quarter simultaneous expiration of options and futures contracts typically causes volume to swell.

Since indexes peaked in late February, the stock market shifted away from technology and growth and into real economy sectors such as industrials and commodity plays. Now, with growth making up the gap, it’s fair to ask if the real-economy rally is holding up.

Breakouts among chemical, manufacturing and other cyclical stocks are not extending gains lately. Some breakouts appear to be fading.

Fertilizer maker CF Industries (CF), which is in IBD Leaderboard, is now below the 48.98 buy point of an ascending base. Chemicals supplier Element Solutions (ESI) has faded back near its 19.50 buy point. Honeywell (HON) tried to break out of a new shallow base but has stalled. 3M (MMM) is barely above a 187.37 buy point.

Some of the real economy winners broke out months before the rotation away from growth started. Deere (DE) and Southern Copper (SCCO), for example, have been leaders for a few months now.

Stock Market Rotation Done?

MarketSmith’s screen of breakouts over the past few weeks finds that the most successful generally are in consumer and tech sectors.

Williams-Sonoma (WSM), another Leaderboard stock, is up nearly 20% from last week’s breakout. Jabil (JBL) is nearly 10% above a flat-base buy point. But overall, few of the breakouts that occurred since the market top are big winners, in any sector.

Meantime, some technology and consumer leaders are setting up and could offer the next profitable stock market opportunities.

Chip-equipment suppliers ASML (ASML) and Entegris (ENTG) are rounding out new bases. Semiconductor stocks, in fact, are showing relative strength. The Philadelphia Semiconductor Index has rebounded more than 11% from its March 8 low. On Monday, the index rallied 2.2%.

In consumer stocks, Floor & Decor (FND) and Yeti (YETI) are shaping bases. Wayfair (W), today’s IBD 50 Stocks to Watch selection, topped a handle buy point. (Floor & Decor got some airplay in Monday’s IBD Live show.)

The IBD 50 rose 0.8%. As in other corners of the stock market, technology stocks provided much of the energy.

The Dow Jones Industrial Average climbed 0.3%; six of its top eight components for the day were techs, while industrials and financials lagged.

View the General Market Indicators chart page here.

Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia

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