Amazon and other stay-at-home stocks are starting to stall. They may hold the key to the market, strategist says.

It has been quite a run for stocks, and on Tuesday the S&P 500 briefly topped the 3,000 level and its 200-day moving average.

Perhaps what was more interesting was the composition of the rally. Value stocks in particular did well, with the S&P 500 value index SP500V, +0.05% surging 2.5% while the S&P 500 SPX, +0.48% rose 1.2%. The small caps also enjoyed stellar gains, with the Russell 2000 RUT, -0.47% jumping 2.8%.

The S&P 500 value index has dropped 17% this year and the Russell 2000 has lost nearly the same, while the S&P 500 has slipped a more modest 7%.

But some of the big coronavirus plays are losing momentum. Software company Zoom Communications ZM, +9.74%, drugmaker Moderna MRNA, +10.73%, streaming service Netflix NFLX, +1.52% and tech giant Amazon AMZN, +1.71% all have, if not declined, at least stopped rising, notes Julian Emanuel, chief equity and derivatives strategist at BTIG.

He says that is cause for concern.

“We’d suggest that the ability for the broad market to build on its recent gains is contingent on names like Zoom, Moderna, Netflix and Amazon and other highflying ‘shelter-in-place’ names whose momentum has waned in recent days, to at least sustain their meteoric advances as leadership passes off to the more cyclical areas and themes,” Emanuel said.

In a follow-up email, he says their strength is important since they have been the market leaders. “They don’t necessarily ‘need’ to hold their ground per se. But because they have been the market leaders, we are making the point that for the overall market to continue to advance, at minimum these stocks need to hold their ground.”

Don’t blink, though — London-based strategists at J.P. Morgan Cazenove say the rotation into value and cyclical stocks won’t last longer than four to six weeks. “Bond yields and oil price are unlikely to sustainably move higher, therefore they will not confirm the rotation, and some of the pent-up demand driving a normalization in [purchasing manager indexes] is likely to be exhausted soon, especially as the lingering negative impact of labor market dislocation starts to bite,” say the strategists led by Mislav Matejka.

The buzz

The European Union proposed a rescue fund consisting of 500 billion euros of grants and 250 billion euros of loans.

The U.S. is considering a range of sanctions to punish China for its crackdown on Hong Kong, Bloomberg News reported, citing people familiar with the matter.

European Central Bank President Christine Lagarde said the eurozone economy is likely to contract along the lines previously outlined in the bank’s medium-to-severe scenarios, ruling out the “mild” possibility. The severe outlook is for a 12% gross domestic product decline and the medium scenario is for a 8% drop, while the mild was for a 5% drop.

Amazon.com is in talks to buy autonomous driving technology company Zoox for less than the $3.2 billion valuation the firm achieved in its last funding round, according to The Wall Street Journal.

Senate Majority Leader Mitch McConnell said on Tuesday that there would “likely” be a fifth coronavirus relief bill “in the next month or so,” according to The Hill.

The Federal Reserve’s Beige Book of economic anecdotes is due at 2 p.m. Eastern.

The market

Stock futures ES00, +0.63% YM00, +0.11% pointed to another day of strong gains.

The euro EURUSD, +0.23% rose after the report on the EU proposal, and Italian bond yields TMBMKIT-10Y, 1.495% fell.

Gold futures GC00, +0.85% fell below the $1,700 an ounce level.

The tweet

Lyn Alden of Lyn Alden Investment Strategy has put together this chart — updating one of hedge-fund titan Ray Dalio’s — showing how the monetary base surges at the end of debt supercycles. She says that in the 1930s, private debt as a percentage of GDP peaked without much inflation, and in the 1940s, federal debt-to-GDP peaked and there was a rise in inflation. That could repeat this time around, she says, with inflation having stayed muted during the recovery from the housing bubble and accelerating as federal debt skyrockets.

Random reads

Car-rental company Hertz paid out millions in bonuses (to executives) before going bankrupt.

Comedian Kathy Griffin still, it appears, does not like President Donald Trump.

Chimpanzees smack their lips together the way humans talk.

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