|Day's Range||1,372.71 - 1,399.05|
|52 Week Range||966.22 - 1,715.08|
The U.S. stock market is firing on all cylinders, and that’s bullish for its near-term prospects. The five largest U.S. stocks by market capitalization are grabbing attention, but their performance doesn’t tell the whole story. Concentration of market cap in five stocks is not a recent phenomenon, as is clear from the accompanying chart.
(Bloomberg) -- For one of the starker examples of how much recovery-obsessed investors are willing to stomach lately, compare this week’s surge in small caps with first-quarter results the companies just finished reporting.Weighted to service-oriented companies particularly hard hit by stay-at-home orders, the Russell 2000 saw per-share profits fall 90% from a year ago, several times more than members of the S&P 500, according to Goldman Sachs data. Meantime, before a hiccup on Thursday, the Russell 2000 Index had risen on eight of nine days in a rally exceeding 16%.“With small company stocks, because they carry significant debt and are more fragile businesses as a group, they face a more existential threat. That’s the same reason they tend to lead the way out of most recessions,” said Peter Mallouk, president and chief executive officer of Creative Planning. It’s not just that their earnings outlook improves, but the “existential risk of complete failure gets taken off the table,” he said.The divergence shows what a powerful force hope has been in guiding investors lately. It’s also a laboratory for observing the impact of Federal Reserve actions in equities. Strength in small caps is by definition strength in companies with the weakest credit profiles, and their fortunes turned almost simultaneously with Jerome Powell’s campaign to shore up bond and lending markets.Investors have shown themselves willing to pivot away from lockdown winners including tech and health care and move into shakier corners of the market. But the damage to earnings for smaller companies in the quarter just passed was deep and those stocks are still playing catch-up. Down about 16% this year, the Russell 2000 has lagged behind the S&P 500 by about 10 percentage points. That’s the most on record this far into the year.Earlier: Investors Pile Into Stocks That Win in a Full Economic RecoveryGoldman’s data is based on the total of how much each Russell 2000 company made in the first quarter and compared it with results from a year ago, showing EPS of $32.53 last year versus $3.23 this year.Rather than looking at per-share results, Vincent Deluard, global macro strategist at INTL FCStone, plotted the total amount of money made by each company that has released results. Based on a 90% reporting rate, the index’s components posted a loss of about $37 billion in the first quarter, his model showed.The group was already on weak footing coming into the crisis. More than a third of U.S. small caps had losses before the outbreak, while 40% don’t have sufficient cash to cover two months of operating expenses, according to a recent report from Deluard.“In such desperate times, only balance sheet strength, and especially cash positions, matter,” he said.Looking ahead, about 47% of Russell 2000 companies are projected to report a loss in the second quarter. That compares with 16% for large ones, according to data compiled by Bloomberg. And at 1 times sales, the Russell 2000 is trading near a multiple that’s one quarter of what investors are willing to pay for stocks in the Nasdaq 100. That’s the biggest discount since the dot-com era, data compiled by Bloomberg show.Some researchers, however, see potential for small-cap outperformance once a recovery begins, signs of which were prevalent this week. Coming out of recessions, small caps have beaten large nine out of the last 10 times and also tend to beat coming out of bear markets, according to Jefferies’s Steven DeSanctis and Eric Lockenvitz.“You’ve seen both value and small-caps do better because of the anticipation of a better economic cycle in the upcoming year,” said Wayne Wicker, chief investment officer of Vantagepoint Investment Advisers. “With that hope by investors, I think you’ve seen a shift to those more pro-cyclical plays.”To Barry James, portfolio manager at James Investment Research, the trend also makes sense. Investors already took advantage of the run-up in tech firms -- now, they’re looking for new deals.“We view the market as a battlefield and the generals have been leading and now maybe the privates are coming into battle,” he said. “Folks realize that is where the opportunities are.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alexion Pharmaceuticals and Workday were early leaders Thursday, while Boeing hoisted the Dow Jones, as the U.S. and China entered a cold war.
May.29 -- Henry McVey, head of global macro and balance sheet investments at KKR, says credit has become an active managers' market with value spots. He speaks with Bloomberg's Erik Schatzker on "Bloomberg Markets."
While there are winners in almost every corner of the small-cap space, we have presented five top-performing, small-cap ETFs from different sectors over the past month.
Stocks ended near session lows amid new developments that could raise tensions between the U.S. and China, and a deluge of new economic data, much of which was still consistent with a contraction but at least signaled some stabilization after an initial slump in activity.
In this episode of Influencers, Hoover Institution Senior Fellow Niall Ferguson joins Yahoo Finance to weigh the policy decisions surrounding the pandemic and help us to put the crisis into perspective.
While value and small caps are starting to recover, the stay-at-home stocks are starting to lose steam. One strategist is concerned.
Yes, a weakening renminbi is worrying, particularly when the US dollar is broadly lower, but fiscal and monetary stimulus is a nice comfort blanket. Japan is rolling out a ¥117tn ($1.1tn) package of easing, equal to 6 per cent of gross domestic product a month, after announcing the previous round of stimulus. The European Commission fired up appetite for regional shares and sovereign bonds with plans to seek approval to borrow as much as €750bn in debt in order to fund the eurozone’s recovery from Covid-19.
On Tuesday, stocks finished higher, though they pared gains after Bloomberg report late in the session that the U.S. was considering sanctioning Chinese officials and firms over new national security efforts imposed on Hong Kong.
The S&P; 500 today crossed two key levels Tuesday, but couldn't hold them. Growth stocks lagged, but Alphabet broke out above a buy point.
Novavax led among biotechs, Merck rose on the Dow Jones today as coronavirus optimism sent stocks to a powerful start.
The owner of Diamond Dental Lab in Des Plaines, Ill., furloughed his staff of nine in late March after the state ordered dental practices to close for all but emergency visits and his customers stopped putting in orders for the crowns, bridges, and implants that his small business has made for the past 20 years. Illinois lifted the coronavirus restrictions on dentists in early May, but Mike Bridge says most of his dentist clients are still closed as they try to get new safety protocols and personal protective equipment in line.
Morgan Stanley’s Mike Wilson argues that the current stock market looks uncannily like March of 2009, when the U.S. economy was beginning to emerge from the financial crisis and the S&P 500 index was beginning its longest bull-market run in history.
Stocks ended little changed Friday, as ongoing signs of the economic damage from the coronavirus pandemic compounded with fears of rising U.S.-China tensions. Still, the three major U.S. equity indices posted weekly advances of about 3%, with investors largely factoring in the fallout from the COVID-19 crisis into asset prices.
U.S. stock benchmarks end up for the week despite rising Sino-American tensions and a holiday that could test the bounds of business reopening efforts after coronavirus lockdowns in much of the country.
The stock market closed mainly higher Friday despite a late dip that came after the U.S. announced measures against some Chinese companies.
Palo Alto and Moderna jumped, as stocks slipped on tension rose in China. Oil stocks led declines on the Dow Jones today.
All three major indices closed in the red after Thursday’s trading session, falling due to the recent update from the U.S. Labor Department on initial unemployment claims and rising tensions in U.S.-China relations. The Final Round panel discusses the latest.
Solita Marcelli, UBS Global Wealth Management Deputy CIO Americas, joins Yahoo Finance's The First Trade to discuss overall markets, jobless claims and what to keep an eye on as economies begin to reopen.
The market this week kind of resembles Chicago weather. If you don't like it, wait a few minutes.We were up big on Monday, down steeply on Tuesday, and up pretty sharply again Wednesday. Futures ticked lower early Thursday. That's the score so far, reflecting a tug of war between hopeful optimism about economic reopening and worries that things could be moving too quickly without a real treatment for coronavirus in sight.Still, it's worth noting that going into today, the market has been up four of the last five sessions, so the overall pattern remains higher and the S&P 500 Index (SPX) is near levels last seen before Covid-19.There's not a lot of rhyme or reason for the slight drop in stock futures indices overnight, though it might reflect renewed tensions in the war of words between the U.S. and China. Major media outlets are calling the weak futures trading "a breather."If it's a breather, it probably won't last too long considering everything on the calendar today. It starts with weekly jobless claims before the opening bell. Then there are several Fed speeches to choose from, including remarks by Fed Chairman Jerome Powell. A lot of that happens early this afternoon, followed after the closing bell by earnings from chipmaker Nvidia Corporation (NASDAQ: NVDA), a company whose shares have received the red carpet treatment from Wall Street so far this year.It would be shocking if Powell says anything market-moving today, considering he's making public comments for the third time in the last week. Jobless claims have gotten a lot of attention lately, though as states reopen they could start to matter a little less.Existing home sales and leading indicators are also due this morning and could get some attention, but keep in mind that these are backward-looking. More recent housing data actually looks pretty decent. Meanwhile, oil continues its amazing rally and is above $34 a barrel this morning.Initial jobless claims continued to be historically high at 2.438 million last week. Still, that was down from a week ago and last week's claims were revised lower. It would be amazing news if these kept falling over the next few weeks as the country reopens and more people get back to work. We can hope.Encouraging Signs Energy got a big lift Wednesday after leading things down Tuesday, while Communication Services and Information Technology also placed high on the leaderboard. Amazon.com, Inc. (NASDAQ: AMZN) and Facebook, Inc. (NASDAQ: FB) both set new all-time highs as investors continue to embrace companies that seem to be doing well in this stay-at-home world.That said, strength in Energy yesterday also suggests that some investors might be putting a little more faith in companies that you need to go outside and maybe even beyond your neighborhood.Airlines, for instance, got a nice tailwind Wednesday. United Airlines Holdings, Inc. (NASDAQ: UAL) and Southwest Airlines Co. (NYSE: LUV) both jumped more than 5%. Any hint of investor interest in the travel sector tells you at least some people expect tourism and maybe even business trips to come back eventually (see more below).The encouraging thing Wednesday was how theSPX managed to hold its gains in the final hour, something it failed to do Tuesday. The SPX finished well above that pesky 2940-2950 resistance band that's been such a tough challenge over the last few weeks. The next major resistance point appears to be the 200-day moving average right smack at 3000, a level not breached since early March.An SPX move above the 200-day would likely be seen as a huge technical victory and might even pull more buyers in from the sidelines. Last year, the 200-day served as solid support several times when things got tough. This year, the SPX fell under the 200-day back in early March, and a few weeks later traded hundreds of points below it. To be back here so fast is really pretty amazing when you think of all the world has been through.Score One for the Little Guys, While Big Box Stocks Lose Steam Another potential green flag is the performance of small-caps recently, which sometimes can be a barometer for an improving economy. The Russell 2000 Index (RUT) is up almost 40% from its lows posted two months ago, compared with a 36% climb for the SPX from its March low.It may not sound like a huge margin of victory for the RUT over the SPX, and it wouldn't be in football. However, you've got to take it in context because the RUT fell 44% from its 2020 high to its 2020 low while the SPX fell just 35%. A bigger drop followed by a bigger rise for the RUT vs. the SPX can't be easily dismissed when you consider how historically the RUT is often thought of as a leading indicator for the broader market.That doesn't mean we're out of the woods by any stretch of the imagination. Data continue to look pretty horrible and probably won't improve much anytime soon. The unemployment rate is a reminder of how many people are suffering out there, and stands in contrast to this rallying stock market. Signs of caution remain firmly in place as the 10-year Treasury yield tipped back below 0.7% on Wednesday and hasn't been able to gain any real traction, due in part to the Fed's historic stimulus.Another troubling thing yesterday was seeing pressure on two companies that reported decent earnings--Lowe's Companies, Inc. (NYSE: LOW) and Target Corporation (NYSE: TGT). That was the second day in a row where investors apparently decided to punish companies after pretty solid reports. The previous day saw Walmart, Inc. (NYSE: WMT) and The Home Depot Inc. (NYSE: HD) getting the silent treatment. Maybe that's something to keep in mind going into NVDA's earnings after the close today, considering what a run it's been on so far in 2020.Gold prices also remain near five-week highs in what could be a signal of caution. On the other hand, crude and copper both are climbing, which can point to improved economic activity. It was good to see crude supplies drop again last week as people start getting out more. Remember, this is typically the time of year when gasoline use hits its peak thanks to travel on holidays like Memorial Day, July 4, and Labor Day. It won't be a typical demand summer for crude, obviously, though after usage dropped to practically zero in April, any change for the better could be welcomed.So from a big picture sense, what seems to be going on out there is optimism, but cautious optimism. People were buying bonds yesterday, and it's very surprising to see the stock market doing well and also seeing people buying bonds.Future Game One way to assess how investors see the economy shaping up is to check crude futures now and then and see if farther-out contracts hold any kind of premium to the so-called "nearby," or front-month contract.The wide gap between the front month and back months has really closed compared with a month ago when it was in steep contango (meaning back months priced higher than "nearby" months). By Wednesday, July crude fetched around $33.50 a barrel, while September was at $34.50. While it's difficult to put much confidence in thinly-traded contacts a year out, it is interesting to see that next June only trades at $36.60.While you don't want to put too much faith in any one indicator, especially such a lightly-traded one, crude in the mid-$30s a year out doesn't show much investor confidence in any major recovery for the global economy. It also might be a bit concerning to those in the energy industry, who could be facing these low prices for months to come. We'll have to wait and see.CHART OF THE DAY: VOLATILE VOLATILITY. The Cboe Volatility Index (VIX--purple line) has been trending down since the March spike, when the market suffered a massive selloff. However, there have been times--notably within the last week--that the VIX Volatility Index (VVIX--candlestick), which uses a basket of VIX options to measure expectations of volatility in the VIX itself (over the next 30 days), has held firm (see more below). Data source: Cboe Global Markets. Chart Source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.Fear of Fear Itself? When trying to gauge the level of fear in the market, many turn to the Cboe Volatility Index (VIX), which uses options on the SPX to measure expectations of volatility over the next 30 days. But how volatile are those expectations? That's where the VIX Volatility Index (VVIX) comes in--it's the market's estimation of what SPX volatility might be in the near future. And though the VIX has been steadily inching back down toward more normal levels after the big spike in March, it's still hovering around 30. This despite SPX seeming to have found a range--along with a moderate uptrend--which typically puts a sizable damper on volatility expectations. Perhaps more interestingly, recent gyrations in the equity market helped lead to a mini-spike in the VVIX (see chart above). Might this indicate that--to paraphrase FDR--one thing this market has to fear is fear itself? Care for a S'more? If there's one story line that defines this week's market action, it might be the eyeing of a return to normal life, and for Americans in the summertime, that means travel. Topping the big-movers list this week is the travel industry, with airlines, cruise lines, and big hotel chains racking up gains upward of 10%. And online travel agents knocked it out of the park, with Booking Holdings Inc. (NASDAQ: BKNG) and Expedia Group, Inc. (NASDAQ: EXPE) gaining 15% and 24% respectively since the end of last week. But what may turn out to be the king of them all this year is camping and all things related to travel in the great outdoors. Since its May 8 reporting of a Q1 loss of 3 cents per share (which was well ahead of consensus), shares of Camping World Holdings, Inc. (NYSE: CWH) have essentially doubled, touching the $20 level Wednesday.According to an article in The Wall Street Journal last weekend, many Americans are turning to recreational vehicles this summer, with reports of sales and rentals of RVs seeing a hefty spike. And why not? It's a nice blend of social distancing and wanderlust, not to mention a throwback to previous generations, when summer travel meant piling into the wood-paneled station wagon and heading for the hills to get away from it all. Slight Uptick In One Economic Estimate: Corporate earnings drive the markets but underlying economic fundamentals also play a role. And as we all know, initial GDP forecasts tend to get revised often since the initial data may not be too comprehensive. GDPNow, a "nowcast" released by the Federal Reserve Bank of Atlanta, is a GDP projection model that provides a running estimate of GDP growth. So as manufacturing data, construction spending, auto sales, etc. get released, GDPNow is revised.The GDPNow estimate for real GDP growth for Q2 2020 is -41.9 percent. That may be a big drop since their initial nowcast of -12.1 percent on April 30, but what's encouraging is that after housing starts were released on Tuesday, the GDPNow forecaster saw its first uptick, from -42.8 to -41.9. It may be slight but it's encouraging news. The next update will be next Thursday, after the Commerce Department releases its second estimate of Q1 GDP. As a frame of reference, since the 2008-09 financial crisis, the U.S. economy has averaged growth of about 2%--not exactly robust by historical standards but certainly a lot better than current estimates for 2020.TD Ameritrade® commentary for educational purposes only. Member SIPC. See more from Benzinga * Chop Chop: Strong Earnings Lift Markets After Tuesday Thud; FOMC Minutes Ahead * Walmart Earnings Look Strong Across the Board, But Home Depot Down After Missing on EPS * Walmart Earnings Ahead: Sales Figures May Offer Outlook For Spending During Coronavirus Lockdown(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Case in point: The S&P 500 index (SPX) index of the 500 biggest domestic companies is down roughly 9% since Jan. 1, but the Russell 2000 index (RUT) which excludes the biggest 1,000 firms listed on U.S. markets and focuses on the next 2,000, is down 20%. While it’s true that smaller companies tend to be more sensitive to economic downturns, that doesn’t mean every small stock is down and out right now. Development-stage biotech stocks are excluded, given the very volatile nature of this subsector.
May.21 -- Investors see the coronavirus pandemic as a natural disaster, causing a severe shock that is relatively short lived, followed by a strong recovery, according to David Riley, chief investment strategist at BlueBay Asset Management. "But one thing which upsets that narrative would be a re-escalation of trade tensions between the world's two largest economies," Riley said in an interview on "Bloomberg Markets: European Open."