If cyclical stocks join the rally, that could drive the market much higher

Key Points
  • Cyclical industries outperformed early in the week before taking a breather Wednesday, but some technical analysts said the breadth of the market appears to be broadening with stocks such as financials and industrials now ready to participate in the market's move higher.
  • Tech and the Nasdaq rose as cyclicals backed off, but strategists say they could ultimately rise together on the promise of a vaccine that should help the economy reopen.
  • "Tech should continue to march along as it has been," said one analyst. "It's the expansion of participation. There's more pillars of strength there."
Wall Street points toward a mostly lower open

Cyclical sectors that benefit from an improving economy are expected to continue to gain alongside high-flying tech names, and that should help give the bull market sturdier legs for its run higher.

Those groups, like energy, financials and materials, surged on Monday and Tuesday after Pfizer announced its Covid-19 vaccine is more than 90% effective and could be broadly available next year. Tech and momentum names initially lagged on the news, but bounced back Wednesday as the cyclical, value trade took a breather.

Analysts said it's still early in the value trade, but they expect it to persist as investors look forward to a broader reopening of the economy in the coming year, and consumers should return to normal activities like travel and shopping in stores.