In today’s market analysis from UBS, they highlight the ongoing rotations in the US thematic basket movers. Despite the S&P 500’s marginal gain, AI risk and software sectors have extended their declines from last week, with {UBXXAIRK} falling by 1% and {UBXXSOFT} down by 2.2%.

Zooming out, UBS notes that there are three closely interrelated rotations driving the market since the end of October: (1) AI into everything else, (2) Growth into Value, and (3) Broadening Breadth. These rotations have only accelerated year-to-date, particularly over the last 2-3 weeks, with the net effect on the S&P being muted, as the index is essentially flat over the last 3 months.

The retreat of staples is notable today, with {UBXXSTAP} falling by 1.6% (nearly 2 standard deviations), which sets it up for its weakest day since November. The sector has been one of the biggest beneficiaries of the rotational dynamics, and it has hovered in overbought territory for much of the year.

Meanwhile, Energy, Industrials, and Materials continue to be the best-performing sectors YTD, with {UBXXENER} up by 16%, {UBXXINDU} up by 10%, and {UBXXMAT} up by 8%.

This week’s macro highlights include the release of FOMC minutes, Q4 GDP first look, and Feb Flash PMIs. There will also be a quieter week for earnings, with WMT being the main highlight. Friday is the next potential date for a SCOTUS tariff ruling.

Overall, UBS’s analysis suggests that the ongoing rotations in the US thematic basket movers are likely to continue shaping the market landscape in the near term. As always, it’s important to stay informed and up-to-date on these developments to make informed investment decisions.