Stocks closed lower again yesterday.

Market rotation continues. But profit taking was seen in all of the indexes after the heady gains we've seen, not just in the leading S&P and Nasdaq, but also in the small-caps and mid-caps that have been the biggest beneficiaries of the recent rotation.

Yesterday's Weekly Jobless Claims rose by 20,000 to 243K vs. the consensus for 230K. Although, the smoother 4-week moving average was only up 1,000 at 234.75K.

The Philadelphia Fed Manufacturing Index jumped to 13.9 from last month's 1.3 and views for 3.0.

And Leading Indicators came in better than expected with a -0.2% m/m change vs. last month's upwardly revised -0.4% (from -0.5%) and estimates for -0.3%.

We also got plenty of earnings yesterday.

Before the open, Taiwan Semiconductor reported a positive EPS surprise of 8.03%, and a positive sales surprise of 3.07%. That translated to a quarterly EPS growth rate of 29.8% vs. this time last year, and a sales growth of 32.8%. They were up 0.39% during the normal session. Novartis reported earnings before the open as well, posting a positive EPS surprise of 5.35%, and a positive sales surprise of 5.18%. That equated to a quarterly EPS growth rate of 10.7%, but a sales growth of -8.22%. They were down -4.10% during the normal session. D.R. Horton also reported in the AM and showed a positive EPS surprise of 7.89%, and a positive sales surprise of 2.92%, for a quarterly EPS growth rate of 5.13%, and a sales growth of 2.47%. They were up 10.1% in the regular session.

After the close we heard from Netflix, which posted a positive EPS surprise of 3.83%, and a positive sales surprise of 0.29%. That represented a quarterly EPS growth rate of 48.3%, and a sales growth of 16.7%. They were up roughly 1% in after-hours trade. Intuitive Surgical also reported after the close and showed a positive EPS surprise of 16.3%, and a positive sales surprise 2.02%, for a quarterly EPS growth rate of 7.75%, and a sales growth of 14.2%. They were up approximately 6.45% in after-hours trade.

We'll get another 41 companies on deck to report today with American Express, Schlumberger, and The Travelers Companies to name a few.

Economic report-wise today, only the Baker Hughes Rig Count report is on the docket. But we will hear from Fed policymakers John Williams and Raphael Bostic as they speak at their engagements throughout the day.

With one more day to go, the S&P 500 and Nasdaq are currently down for the week, while the small-cap Russell 2000, the mid-cap S&P 400, and the Dow are up.

But as I mentioned yesterday, the rotation trade and breadth expansion is still in play. And ultimately, I see that benefitting not just the small-caps, but all the cap sizes as well. But the small-caps should be a big winner of the rotation and breadth expansion that's currently underway.

And we'll see if the market can stabilize after yesterday's pullback.

See you tomorrow,