Nowhere to hide this time! Overnight, US stocks fell across the board

Overnight U.S. employment data once again reflects a cooling labor market, with signs of economic weakness overwhelming the market's optimistic expectations for rate cuts. U.S. stocks fell across the board, with small-cap stocks and financial stocks declining alongside large tech stocks.The Russell 2000 index, which focuses on small-cap stocks, fell by about 2% after a strong rebound. The Nasdaq fell by over 1% intraday, the Dow closed down 1.3%, ending a six-day winning streak without reaching a new high. The S&P 500 also fell by over 1% intraday, with almost all major components declining. Meanwhile, the VIX volatility index surged by 10%, reaching its highest level since April this year, reflecting investors reassessing market volatility over the next thirty days.VIX volatility surges 10% to highest level in two and a half monthsThe market's optimistic expectations for rate cuts initially led investors to swiftly exit large-cap stocks, driving the strong rise of small-cap stocks. However, the pause in this market trend "big switch" overnight reflects some hesitation in the market after initial jobless claims showed a cooling labor market, raising doubts about whether to continue pouring into small-cap stocks.Analyst Dan Wantrobski from Janney Montgomery Scott believes that the recent "rotation" has pushed the large-cap market into a moderately overbought area in the short term. He pointed out that these factors make it easier for the large-cap market to consolidate in the short term:This style rotation is still in a very early stage, and we believe it cannot yet be confirmed as a long-term investment theme. Therefore, despite the broader stock rally and the encouraging push from more stocks, we want to be cautious of any false signals.Media reports that analyst Craig Johnson from Piper Sandler commented:Investors quickly withdrew funds from 'overcrowded' large tech stocks and invested in 'undervalued' opportunities. While this provides a basis for a broad bull market, it is advisable to take action on confirmed support level pullbacks and improve market breadth signals.Tom Essaye, founder of research firm The Sevens Report, stated:After significant volatility in trading over the past week, the market needs some digestion of the rotation... But whether the rotation can continue will depend on economic data and company earnings.SoFi analyst Liz Young Thomas stated that as the Fed begins a rate-cutting cycle, the market often cheers in the initial period or even shortly after the rate cut starts:But if the rate-cut cycle coincides with slowing economic data, disappointing company earnings, or rapid PE compression, small-cap stocks may quickly lose momentum... Not to mention, the Fed typically cuts rates in the late stage of the economic cycle, not in the early stage, **and small-cap stocks often become the focus in the early stages**