The indexes were muted Monday as traders digested last week’s sharp gains. The S&P 500 closed essentially flat at 4,128, notes Jon Markman of Pivotal Point.

The past two weeks have been a wild ride for bullish investors and our positions as cyclical and big-capitalization technology issues traded leadership roles.

My guess is another rotation is forthcoming. This time smaller-capitalization shares look ready to rally. Regional banks are especially attractive as the earnings reporting season ramps up and managers get their first opportunity to talk about the red-hot mortgage and renovation markets. Critical support for the S&P 500 (SPX) is still 4,000.

The Dow was 0.2% lower at 33,745.40, and the Nasdaq 100 declined by 0.2%. Energy and communications services were the steepest decliners among the sectors while consumer discretionary was the biggest gainer.

Breadth favored decliners over advancers, and there were 695 new highs and 91 new lows. Topping the new highs list was Microsoft (MSFT), Home Depot (HD), Oracle (ORCL), Honeywell (HON), United Parcel Service (UPS), Lowe’s (LOW), and Phillip Morris (PM). Good vanguard again.

Ahead of the beginning of the first-quarter earnings season, Goldman Sachs said results are set to show growth in sales and earnings for the largest companies. While that means more gains for the S&P 500 Index, which hit yet another record last week, investors are looking for management views on key issues such as cost pressures and impact of higher taxes, it added.

Meanwhile, the US economy is at "an inflection point" where economic growth is about to accelerate as the year progresses, with the main risk to the economy being a resurgence of the COVID-19 pandemic, Federal Reserve Chairman Jerome Powell said in an interview on CBS's 60 Minutes Sunday evening.

More than 4.4 million new COVID-19 cases were reported last week for a seventh week in a row, said Maria Van Kerkhove, the technical lead for COVID-19 at the World Health Organization. Confirmed cases are said to have jumped by 9% globally last week, with fatalities increasing by 5%.

In company news, Microsoft (MSFT) pulled the trigger on its second-largest acquisition to date, saying Monday it agreed to acquire cloud and artificial intelligence software provider Nuance Communications (NUAN) in a $19.7 billion deal. Nuance shares closed 16% higher while Microsoft was slightly higher.

Learn more about Jon Markman at Pivotal Point.