What happened

Shares of Wayfair (W 1.96%) slipped today even though there was no news out on the e-commerce home furnishings specialist. Instead, the driving force behind the sell-off was a broader rotation in the market as investors sold out of pandemic winners like e-commerce stocks, and bought recovery plays like airlines.

Wayfair stock closed the day down 8.7%, while the tech-heavy Nasdaq gave up 2.5% and the Dow Jones Industrial Average finished the day slightly higher, showing the rotation from tech stocks to recovery stocks.

Two delivery people set up furniture in a home.

Image source: Getty Images.

So what

Investors seem to be anticipating that the pandemic may end earlier than some projections indicate as virus cases have plummeted over the last month in the U.S., and vaccines are being effectively deployed in the U.S. and other countries. A study in Israel showed that the Pfizer-BioNTech vaccine was 89% effective at stopping transmission of the virus, giving additional reasons to be optimistic about the recovery.  

Also today, bond yields rose as the benchmark 10-year Treasury note finished at a one-year high of 1.37%, a sign investors expect the recovery to drive up inflation, which is leading investors to rotate out of growth stocks in favor of recovery plays, blue-chip stocks, and bonds.

Wayfair is set to report earnings on Thursday, and investors may also be realizing that the company's run of blowout earnings reports will soon be coming to an end. As a seller of home goods through e-commerce, Wayfair benefited from two major tailwinds during the pandemic: demand for home goods and shoppers shifting to the online channel, but that trend will end as the pandemic fades.

Now what

Investors are expecting another blowout quarter from Wayfair, seeing revenue up 47.5% to $3.74 billion and earnings per share of $0.82 a share compared to a loss of $2.80 in the quarter a year ago.

However, all eyes will be on the company's outlook for 2021 as that will affect the stock more than the fourth-quarter results. Whatever the company's guidance for the year is, expectations for the pandemic's end will also weigh on the stock as consumer spending is likely to shift to services like restaurants and travel once it's safe.