Dead Cat Bounce Or A Bottoming Process?

*Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

• DJIA 52-wk: +14.70% | YTD: -3.24% | Wkly: +2.96%
• S&P 500 52-wk: +21.98% | YTD: -3.84% | Wkly: +3.36%
• NASDAQ 52-wk: +32.20% | YTD: -5.86% | Wkly: +4.44%
• United States Oil Fund 52-wk: +90.89% | YTD: +99.42% | Wkly: +11.05%

Russell 2000 (RUT): closed at 2,530.04, up 0.7% on the day. The index ended the week up about 1.9%, according to AP’s weekly market summary.

The Russell is usually the market’s “honesty index.”

Because it reacts fast to:

• Rates
• Credit conditions
• Domestic growth
• Regional banks / financing conditions
• Consumer sensitivity

All Figures correct as of closing Friday 3rd April, 2026.

Bottom line

This was a messy, headline-driven, macro week where the tape was held hostage by oil, geopolitics, rates, and inflation fears.
The market tried to stabilize into quarter-end, but the move was fragile, narrow, and not fully trusted. The real story was that energy shock risk is back on the board. Reuters

If you only watched one thing this week, it was oil.

Crude stayed front and center as the Iran / Middle East conflict kept traders focused on supply disruption, inflation spillover, and stagflation risk. Reuters reported oil surged sharply during the week, with one session seeing nearly an 8% jump in global benchmarks and U.S. crude up more than 11% intraday as war headlines escalated. ~Reuters

Trader translation:

When oil starts acting like a macro wrecking ball, the market immediately reprices:

• inflation
• Fed cuts
• consumer spending
• transport / airline margins
• and the multiple on growth stocks

That was the overhang all week. ~Reuters

By Friday’s close, the market had not completely fallen apart — but don’t confuse that with health.

The market spent the week swinging hard intraday, with sharp reversals and no real conviction. Reuters described Thursday’s action as volatile and mixed, which is exactly what it looked like — a market trying to hold together while traders constantly repriced war risk and inflation risk.

And will likely be one of the key drivers for stocks for years to come.

A recent comment underscoring the AI trade came from AMD CEO Lisa Su, who characterized the demand for AI as "insatiable," and said her company alone could grow by 35% a year for the next 3-5 years because of that. In fact, she said the AI market is "faster than anything we've seen before." And she predicted the AI data center market could grow to "$1 trillion" by 2030.

Market volatility continues apace, as news headlines, and even simple statements or policy hints, have shown the ability to move markets quickly in both directions. This kind of short-term volatility can feel like it carries greater meaning in the moment. But it doesn’t always tell us much about what is happening beneath the surface. In fact, it often gives investors the wrong message.1

My case-in-point this week: the growing gap between the market’s largest growth stocks and the broader index. As shown below, the once-heralded names in Technology and the “Magnificent Seven” have declined significantly more than the S&P 500 overall in 2026, with drawdowns approaching three times the magnitude of the broader market.

‘Mag 7’ and Tech represent the largest growth-oriented segment of the market, and they continue to deliver the strongest earnings growth in the index. The Technology sector, broadly defined, is expected to produce earnings growth of more than 25% in the first quarter on over 20% revenue growth. By comparison, total S&P 500 earnings are expected to rise in the low double digits, and closer to mid-single digits if you exclude Technology’s contribution.

In other words, the sector doing the most to drive earnings growth is also the one experiencing the most pronounced selling pressure.

In fairness, some of this may reflect valuation concerns. Large-cap growth stocks entered the year trading at elevated multiples, and in periods of uncertainty, investors often trim exposure to the most expensive areas of the market first. There are also legitimate questions about how artificial intelligence may reshape competitive dynamics over time, particularly across software and digital platforms. But even taking those factors into account, the magnitude of the recent move appears disproportionate to what we are seeing in current earnings data. If anything, the disconnect suggests that expectations are being reset more quickly than fundamentals are deteriorating. In my experience, that’s a classic sign of correction, not the beginning of a bear market.

The earnings revisions trend reinforces my argument. Since the start of the year, estimates for the Technology sector have continued to move higher, even as stock prices have come under pressure. The positive earnings revision trend has not been isolated to one corner of the market either, as roughly half of all sectors have seen upward estimate revisions since March, including Financials, Materials, and Industrials. This is not what we typically see in an environment where markets are pricing in a broad earnings slowdown.

Periods like this also tend to reward a disciplined, earnings-driven approach. Corrections driven by sentiment and positioning tend to feel uncomfortable in real time, particularly when leadership is involved, but they often unfold without the kind of broad-based deterioration that typically defines more severe downturns. Strategies that emphasize earnings growth, estimate revisions, and diversification get rewarded most when markets recover.

The recent underperformance of large growth stocks is a notable development, but it is important to understand what I believe is driving it. While valuations and longer-term growth expectations are being reassessed, the underlying earnings picture remains relatively strong, with positive revisions across multiple sectors. That combination points more toward a shift in sentiment and positioning than a breakdown in fundamentals.

For investors, it is a reminder that short-term market moves do not always align neatly with earnings trends, and that maintaining diversification across sectors and styles remains critical when leadership changes. It is also worth remembering that when corrections run their course, the areas that were hit hardest often rebound the fastest. For strategies like Zacks Focus Growth, which can create an opportunity to participate when sentiment resets and fundamentals reassert themselves.

March Jobs Report (Released Friday, April 3, 2026)

Headline take: better than feared

The labor market came in stronger than expected, which helps the soft-landing crowd — but it was not a perfect report under the hood. Think solid headline, mixed internals. ~Bureau of Labor

The key numbers

• Nonfarm payrolls:+178,000
• Unemployment rate:4.3%
• Main job gains:Health care, construction, transportation & warehousing

Weak spot:Federal government employment continued to decline. ~Bureau of Labor

1) Payrolls bounced back

After a weak February, March showed a clear rebound in hiring. Reuters noted this was the strongest jobs gain in about 15 months, which tells the market the economy has not cracked yet.

2) No recession signal — yet

A report like this says: “The labor market is slowing, but it’s not breaking.”

That’s important because jobs are still one of the biggest supports under the economy. If payrolls had missed badly again, recession fears would’ve ramped fast. Bureau of Labor

1) It may keep the Fed sidelined

A stronger jobs print means the Fed has less pressure to cut. Reuters’ economist reaction was basically: this report is good enough to keep the Fed on hold, especially with inflation still sticky and oil prices elevated. Reuters

2) Under the hood, it wasn’t a flawless report

The internals were a little less clean than the headline:

• labor-force participation softened
• wage growth cooled
• and some of the strength was helped by temporary / rebound factors like better weather and the end of a health-care strike, per Reuters

That’s why I’d call it: “good enough to calm recession fears, not good enough to erase macro risk.”

1) CPI

This is the big one. If inflation runs hot with oil in the mix, the market will not like it. ~Reuters

2) Fed expectations

Any sign rate cuts get pushed out further can hit long-duration growth again. ~Reuters

3) Oil / Middle East headlines

Still the fastest macro headline risk on the board. ~Reuters

If you’re trading this market, you should assume:

1. headline risk is high
2. overnight risk is high
3. false breakouts are common
4. and macro is still in charge

This is not a clean tape. This is a survival tape.

Meaning:

• take profits faster
• size tighter
• don’t chase late
• and watch oil / yields / CPI / SPX levels more than stories

Whether this is just a dead-cat bounce or the early stages of a bottoming process, I still think the rally has more near-term upside.

– Richie

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