The market rotation that started last week continued on Monday, with defensive sectors leading the way. The technology sector was once again under pressure, with the QQQ ETF down 2% and financials strengthening, led by the XLF ETF. However, the rally in consumer stocks slowed down compared to the previous day, with retail stocks underperforming and off-price retailers seeing some profit-taking. Industrials were also under pressure, with the sector down 165bps and tech lagging. Utilities were the top performer, up 100bps, while agriculture was also higher.

In terms of flows, our data suggests that investors are still net selling tech stocks, with $1.4 billion net sold in the past week. This brings the total net sold since the start of the tech unwinding to $27 billion, exceeding the amount seen during the July unwind. However, there were some signs of rotation in flows today, with communications services seeing better buying interest than yesterday.

Looking at the big picture, the market rotation that started last week has been driven by a combination of factors, including valuations, post-dem sweep utilization, and investor sentiment. While the tech sector has been under pressure, other sectors such as financials and consumer stocks have been seeing tailwinds. The next few days will be key in determining the extent of this rotation and whether it will continue.

In conclusion, the market rotation that started last week continued on Monday, with defensive sectors leading the way. While tech stocks were under pressure, other sectors saw tailwinds. The flows data suggests that investors are still net selling tech stocks, but there were some signs of rotation today. The big picture remains complex, and the next few days will be key in determining the extent of this rotation and whether it will continue.