“Company guidance during the current earnings season is sparking a tumultuous rotation of money from big, safe stocks into riskier names, according to Peter Kenny, managing director at Knight Capital.
Guidance is a bit confusing at some levels, he noted, particularly with some negative economic trends such as a drop in durable goods order, flat business investment and continued Eurozone weakness.
“We’ve seen the trading off of the earnings very dramatically volatile,” Kenny told Yahoo. “It’s led to a lot of volatility in the overall market.”
Kenny said the “lumpy and uneven” quarterly results has created a lack of market harmony, but has also uncovered some sectors that were previously neglected.
“Earnings and guidance are helping that rotation out of the defensives and into the more risk-oriented or growth-oriented or alpha-oriented issues, and away from the Dow 30 and into the S&P 500,” he said.
Kenny said both small-cap and mid-cap stocks are beating the Dow Jones Industrial Average at the moment….”
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