QE3's rally couldn't last forever, and after a few days of stimulus-related rallying, the major market indexes have pulled back slightly. The Dow Jones Industrial Average (DJINDICES:^DJI) is down 0.38% near the end of trading, and the S&P 500 (SNPINDEX:^GSPC) has fallen 0.46%. Of the 30 Dow components, 20 are on the decline today in a broad selloff.
Stocks that rallied last week are leading the selloff today. Alcoa (NYSE:AA) and Bank of America (NYSE:BAC) are the two biggest decliners so far today, losing 2.5% and 2.6%, respectively. This isn’t a huge surprise, and I warned over the weekend that stimulus-infused rallies could be short-lived for stocks like this.
On the flip side, defensive stocks like Pfizer (NYSE:PFE) and McDonald's are about 0.6% higher as investors move back to more fundamentally strong companies.
The real mover today is oil, which has fallen 2.8% after a rally last week on rumors of a negative reserve release. The commodity's rally wasn't based on any fundamental strength in demand, and I could argue that the reasons for oil's rally didn't make sense at all. Central banks are stimulating as much as they can because the economy is weak, not the other way around -- which should be bad for oil. If the stimulus kick-starts the economy, oil should rally, but we're a long ways from seeing that happen.
There isn't a lot of news driving the markets today, so this is really a profit-taking day for traders after a two-week winning streak. The rally didn't make a lot of fundamental sense after some bad earnings news, so I wouldn't be surprised to see weakness for the rest of the week.