It was bad enough that Monday was tax day! The major indices gapped higher to start the week, but gave up their gains by lunchtime and then saw some strong downside acceleration before stabilizing in the final hour. The S&P 500 (SPX) lost 1.2% and is down 2.6% in the past two days, booking the largest drop since late in October of 2023. Since its all-time high (ATH) close on March 28, the SPX is off 3.7%, its largest 11-day drop since October. The Nasdaq 100 (QQQ) fell 1.7% for a two-day decline of 3.2%. The index has given back 3.4% since its March 22 all-time high.

We have talked about the weekly winning streaks of the major indices. As of Friday, most were 17 for 21 -- or winners 81% of the time. During that same time, the S&P 500 (SPX) jumped 27% and the Nasdaq and the Nasdaq 100 popped 30%. In sports, going 17/21 is about as good as it gets (although field goal kickers are sometimes better). One might expect a pullback (certainly possible), a correction, or something more dramatic after a run like this. But history is on the side of the bulls.

After the heavy-volume, bearish reversal on March 8 for the Nasdaq, Nasdasq 100 (QQQ), semiconductors, and most of the Technology sector, we had some downside follow-through for the first time since this monster rally started in October 2023. The QQQs and the iShares Semiconductor ETF (SOXX) have lost their 21-day exponential moving averages (EMAs) by a minor amount. Still, for more than four months, the 21-day EMA has been quickly recaptured whenever this happened.

Early last year, the consensus belief had the economy headed toward a recession and the Federal Reserve needing to be aggressive with interest-rate cuts to prevent significant weakness in GDP. As 2023 progressed, the recession callers backed off as the economy kept its footing after the huge hike in the fed funds rate as well as the entire Treasury curve. And while inflation came down a lot faster than may thought, it did so without a concurrent weakening in the economy.

As we move into the second half of January, the major indices are at, near, or closing in on all-time highs. Yet technical evidence continues to mount for some type of pullback or correction. We have talked recently about poor market breadth, but there are plenty of other and more-obscure indicators that also do not line up well for the bulls.

The U.S. Dollar Index (USD) started trading in January 1973 and, believe it or not, has not gone anywhere for the past five decades. After moving sideways until the beginning of 1981, the greenback spiked higher until early 1985, rising to $165 from $100. As quickly as it soared, it then came crashing down, tracing out a very narrow Christmas tree and ultimately bottoming in 1992 at $79. Since early 1986, the greenback has been trapped in a fairly wide range between $71, hit in 2008, and $120, reached in early 2002. Since a secondary low was hit in 2011, the USD has been in a fairly consistent but wide bullish channel. A major part of the USD is the euro (about 60%), so it's not surprising that since that currency began in 1999, it has been (very) negatively correlated with the greenback.

The S&P 500 has risen about 27% from its bear-market low of 3577 on October 12, 2022. The index surpassed the 20%-gain mark back in June and, according to the long-held theory, is now in a bull market. Certainly, there were some wobbly steps back in August, September, and October, when the index sold off 2.1%, 5.0%, and 4.0%, respectively, due to high inflation and high interest rates. But the market seems to have settled down in November and stocks are closing in on new 52-week highs. What can investors expect going forward from a bull market? We have studied the 13 bull markets that have occurred since the end of World War II. On average, the S&P 500 gained 164% during these 13 periods, which averaged 57 months in duration. We also note that the recent bull markets have generated higher returns over longer periods of time. On average, the five bull markets since 1980 have seen stocks advance about 240% over a period of 70 months. And the bull market prior to the pandemic carried on for 11 years and stocks rose 500%. It is worth pointing out, though, that the 2009-2020 bull market began with stocks deeply depressed on valuation, whereas stocks are already a bit above fair value in the current market environment as interest rates are high and earnings growth is only beginning to ramp up. Even so, if rates continue to head lower on mild inflation news, earnings growth accelerates and the economy can avoid a recession, then this new bull market could have some room to run.

Crude oil (WTI) has been in a steep decline since peaking at an intraday high of $95 on September 28. WTI hit an intraday low of $72.37 on November 16, its lowest level since early July. Oil has dropped into a potential strong area of chart support between $67 and $75 -- a zone that we highlighted for trading earlier this year. Seasonality is very weak in October and November, starts to improve in December, and is pretty strong during March, April, and May.

Stocks finished mixed on Thursday, as investors weighed earnings reports and weekly employment data. Walmart shares fell 8% despite strong 3Q results after the company warned of a slowdown in consumer spending. Cisco also fell nearly 10% after lowering its FY24 guidance. Mortgage rates dropped for the third week in a row. On the employment front, weekly jobless claims rose to a three-month high. First-time claims for state unemployment benefits rose by 13,000 to a seasonally adjusted 231,000 for the week ended November 11, above the Reuters consensus of 220,000. The Dow fell 0.1%, the S&P rose 0.1%, and the Nasdaq was up 0.1%. Crude oil fell sharply to $73 per barrel, its lowest level in nearly four month. Gold rose $20 to $1984 per ounce.

As is often the case, October put fear into play -- but we certainly have seen worse. Even with the bear market in 2022, the S&P 500 (SPX) has now endured its first three-month decline since 2020. The SPX lost 2.2% in October, the Nasdaq gave back 2.8%, the Nasdaq 100 (QQQ) fell 2.1%, the S&P 500 Equal Weight dropped 4.2%, the S&P MidCap 400 declined 5.3%, and the Russell 2000 gave up 6.9%. It remains clear that there is an ongoing distaste for small- and mid-cap stocks, and about 100 SPX issues fell at least 8% for the month.

Overall insider sentiment, based on proprietary data from Vickers Stock Research, continues to improve - with sentiment from executives at companies that trade on the Nasdaq leading the charge. We are not ready to call for a bullish stampede, as the short-term and long-term readings from Vickers are not yet fully aligned. But they are clearly moving in that direction. Here are some highlights.

Vickers Stock Research, a subsidiary of Argus Research Group, tracks and analyzes insider trading and institutional stock ownership trends. Institutions must file a Form 13F to report their holdings, and it is due 45 days after the end of calendar quarters. So these forms have now come in from 2Q23. We like to review the 13Fs of major activist investors, including Carl Icahn, Trian Fund Management, Jana Partners, and ValueAct Holdings, among others, in order to determine their core holdings and new purchases. Activist investing has evolved in recent years and is now less about generating a short-term return on an underpriced stock and more about achieving long-term returns through an active management/investor partnership. Activists have made progress in the past year with high-profile investments into companies such as Fedex and Union Pacific. According to Vickers, here are some recent new purchases and key holdings of activist investors, as well as other high-profile money managers such as Warren Buffet of Berkshire Hathaway and Ken Griffin of Citadel Advisors LLC.

Stocks edged higher on Tuesday morning, led by gains in the Financial and Consumer Discretionary sectors. The World Bank issued mixed forecasts for the global economy. It expects global GDP to increase 2.1% this year, up from its prior forecast of 1.7% but down from 3.1% growth in 2022. The revision included a higher growth forecast for the U.S., to 1.1% from 0.5%, and for China, to 5.6% from 4.3%. At the same time, the bank cut its global growth forecast for 2024 to 2.4% from 2.7%. The Dow was flat, the S&P rose 0.2%, and the Nasdaq rose 0.3%. Crude oil traded near $72 per barrel, while gold rose slightly to $1975 per ounce.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Markets Dented but not Downed by Silicon Valley Bank

Monday Tee Up: The Fed Takes Center Stage

Stocks retraced earlier losses on Tuesday morning. The Dow rose 0.2%, the S&P 500 rose 0.3% and the Nasdaq was up 0.2%. The ISM Non-manufacturing index unexpectedly rose in August to a reading of 56.9% against estimates for expansion to cool to a reading of 55.2%. Supplier deliveries contracted at a slower pace while new orders rose at a faster pace. OPEC has agreed to cut production by 100,000 barrels per day. Crude oil rose 1% to $88 per barrel, while gold fell $8 to $1714 per ounce.

Short-term breadth was strong during the late-May rally. However, long-term measures of breadth take time to turn from bearish readings, so we don't have enough evidence to say that the final low is in. Recently, NYSE advancing volume/total volume put in three straight 80% days and the NYSE advancers/total issues registered two 80% days. That is considered a breadth thrust and one of the hallmarks of a market bottom.

While the stock market is still in a downtrend, the S&P 500 is near its intraday low from the initial decline on January 24, when it hit 4,223 and bounced sharply. To get a real flush in market breadth and the extremely bearish sentiment, we need to have a consistent move lower for more than a few days or a very large single-day move lower.

Is This the Corner?

Stocks finished mixed in volatile trading on Thursday as investors assessed the likely timeline for Fed tapering and the uncertain impact of the Delta variant. Employment data was generally positive, as first-time unemployment benefit claims fell to 348,000, down from the prior week and below consensus. Continuing claims also fell from the prior week, to 2.820 million, but were slightly above the consensus forecast. On the earnings front, Macy's shares jumped nearly 20% after the company posted much better than expected 2Q results, reinstated its dividend, and raised its full-year guidance. The Dow fell 0.19%, the S&P rose 0.13%, and the Nasdaq rose 0.11%. Crude oil fell more than 2% to $64 per barrel, while gold fell slightly to $1783 per ounce.

For the month of May, the S&P 500 managed to eke out a 0.6% gain; the Nasdaq made a nice comeback, cutting its loss to 1.5%; the Nasdaq 100 (QQQ) dropped 1.2%; the S&P 400 rose 0.2%; and the Russell 2000 (IWM) rose 0.3%. Once again, action was seen in all 11 S&P sectors as well as in individual names.

The stock market rallied on Friday, bringing most indexes into the green - though tech stocks remained down. During Friday's session, the Dow Jones Industrial Average rallied 572 points, or 1.85%. The S&P 500 was up 1.95%, and the Nasdaq Composite increased 1.55%. For the week, the DJIA was up 564 points, or 1.82%, the S&P 500 was down 0.81%, and the Nasdaq Composite was down 2.06%. Year-to-date, the DJIA is up 2.91%, the S&P 500 is up 2.29%, and the Nasdaq Composite is up 0.25%.

Stocks traded mostly lower on Tuesday morning, a day after rallying strongly on news of positive clinical trial results for the Pfizer/BioNTech coronavirus vaccine. Technology and Communication Services stocks fell as investors turned away from companies that have benefited from remote working and stay-at-home restrictions during the pandemic. On the earnings front, Beyond Meat shares fell more than 20% after the company posted sharply lower revenue and a wider-than-expected third-quarter loss. Eli Lilly shares rose more than 3% after the drug maker received FDA emergency use authorization for its COVID-19 antibody treatment. The Dow was flat, the S&P fell 1.0%, and the Nasdaq fell 2.2%. Crude oil traded near $41 per barrel, while gold rose $26 to $1881 per ounce.

Stocks finished higher on Thursday, recovering from midday losses, as investors weighed weekly employment data, mixed corporate earnings, and prospects for a new fiscal stimulus package. First-time claims for state unemployment benefits fell to 1.186 million, below the consensus of 1.415 million. While this was the lowest weekly reading since March, initial claims still topped 1 million for the 20th straight week. Continuing claims, reported with a one-week lag, fell to 16.107 million from 16.951 million a week earlier. The data came ahead of the government's July employment report on Friday morning. The Reuters consensus calls for the addition of 1.58 million payroll jobs, down sharply from 4.8 million in June, and a drop in the official unemployment rate to 10.5% from 11.1%. The Dow rose 0.68%, the S&P 0.64%, and the Nasdaq 1.00%. Crude oil fell slightly to $42 per barrel, while gold rose $26 to $2075 per ounce.

Stocks finished higher on Thursday, recovering from midday losses, as investors weighed weekly employment data, mixed corporate earnings, and prospects for a new fiscal stimulus package. First-time claims for state unemployment benefits fell to 1.186 million, below the consensus of 1.415 million. While this was the lowest weekly reading since March, initial claims still topped 1 million for the 20th straight week. Continuing claims, reported with a one-week lag, fell to 16.107 million from 16.951 million a week earlier. The data came ahead of the government's July employment report on Friday morning. The Reuters consensus calls for the addition of 1.58 million payroll jobs, down sharply from 4.8 million in June, and a drop in the official unemployment rate to 10.5% from 11.1%. The Dow rose 0.68%, the S&P 0.64%, and the Nasdaq 1.00%. Crude oil fell slightly to $42 per barrel, while gold rose $26 to $2075 per ounce.

Carrying On: Our Monthly Survey of the Economy, Interest Rates, and Markets

Carrying On: Our Monthly Survey of the Economy, Interest Rates, and Markets

Over the past 10 days, the S&P 500 has been fairly quiet. Indeed, the 10-day rate-of-change of 1.7% is the calmest action we have seen in over two months. It's possible that the index is tracing out a small head-and-shoulders top that would be complete on a break below 2,727. That would open the door for a measured move down to 2,575.

Over the past 10 days, the S&P 500 has been fairly quiet. Indeed, the 10-day rate-of-change of 1.7% is the calmest action we have seen in over two months. It's possible that the index is tracing out a small head-and-shoulders top that would be complete on a break below 2,727. That would open the door for a measured move down to 2,575.

For a little over four months, there wasn't a seller to be found. From early October to early February, stocks grinded higher without a care in the world. Even after the discovery of the coronavirus, the resilient market barely batted an eye. Of course, that lockout rally was quite frustrating as day after day, week after week, the froth (sentiment) on the beer was so thick it was undrinkable.

For a little over four months, there wasn't a seller to be found. From early October to early February, stocks grinded higher without a care in the world. Even after the discovery of the coronavirus, the resilient market barely batted an eye. Of course, that lockout rally was quite frustrating as day after day, week after week, the froth (sentiment) on the beer was so thick it was undrinkable.

Our weekly review of sentiment among corporate insiders -- as measured by Vickers Stock Research and based on the collection and analysis of transaction forms filed with the SEC by executives, directors and beneficial owners of publicly traded companies -- shows a tale of two trends. With earnings season coming to a close, and insiders soon able to (generally) trade at will once again, we'll see if these two trends combine. If they do (likely), we'll see if they combine towards the positive trend or the worrisome trend. Here's some detail.

Our weekly review of sentiment among corporate insiders -- as measured by Vickers Stock Research and based on the collection and analysis of transaction forms filed with the SEC by executives, directors and beneficial owners of publicly traded companies -- shows a tale of two trends. With earnings season coming to a close, and insiders soon able to (generally) trade at will once again, we'll see if these two trends combine. If they do (likely), we'll see if they combine towards the positive trend or the worrisome trend. Here's some detail.

Stocks finished higher on Thursday, recovering from midday losses, as investors weighed weekly employment data, mixed corporate earnings, and prospects for a new fiscal stimulus package. First-time claims for state unemployment benefits fell to 1.186 million, below the consensus of 1.415 million. While this was the lowest weekly reading since March, initial claims still topped 1 million for the 20th straight week. Continuing claims, reported with a one-week lag, fell to 16.107 million from 16.951 million a week earlier. The data came ahead of the government's July employment report on Friday morning. The Reuters consensus calls for the addition of 1.58 million payroll jobs, down sharply from 4.8 million in June, and a drop in the official unemployment rate to 10.5% from 11.1%. The Dow rose 0.68%, the S&P 0.64%, and the Nasdaq 1.00%. Crude oil fell slightly to $42 per barrel, while gold rose $26 to $2075 per ounce.

Carrying On: Our Monthly Survey of the Economy, Interest Rates, and Markets

Over the past 10 days, the S&P 500 has been fairly quiet. Indeed, the 10-day rate-of-change of 1.7% is the calmest action we have seen in over two months. It's possible that the index is tracing out a small head-and-shoulders top that would be complete on a break below 2,727. That would open the door for a measured move down to 2,575.

Our weekly review of sentiment among corporate insiders -- as measured by Vickers Stock Research and based on the collection and analysis of transaction forms filed with the SEC by executives, directors and beneficial owners of publicly traded companies -- shows a tale of two trends. With earnings season coming to a close, and insiders soon able to (generally) trade at will once again, we'll see if these two trends combine. If they do (likely), we'll see if they combine towards the positive trend or the worrisome trend. Here's some detail.

For a little over four months, there wasn't a seller to be found. From early October to early February, stocks grinded higher without a care in the world. Even after the discovery of the coronavirus, the resilient market barely batted an eye. Of course, that lockout rally was quite frustrating as day after day, week after week, the froth (sentiment) on the beer was so thick it was undrinkable.

Spreads in the yield curve remain tight on an historical basis. This suggests economic growth may remain slow in the quarters ahead. We base our conclusions on analysis of interest-rate activity dating to 2000. The current spread between the two-year Treasury note and the 10-year Treasury bond is 21 basis points, which is 140 basis points below the average spread of 161 basis points. At the short end of the yield curve, the current spread between the two-year Treasury note and the five-year Treasury note is three basis points, compared to a historical average of 79 basis points. The story is similar at the long end: the current spread between the 10-year Treasury bond and the 30-year Treasury bond is 45 basis points, compared to the historical average of 80 basis points. The implications from the tight spreads have been recognized by the Federal Reserve, which has been cutting rates. We think the Fed is better off remaining on the sideline into 2020, as opposed to cutting rates. Though fears over trade could slow economic growth, recent data (payrolls, in particular) has been solid. We think the Fed should preserve its firepower for bigger crises down the road.

Spreads in the yield curve remain tight on an historical basis. This suggests economic growth may remain slow in the quarters ahead. We base our conclusions on analysis of interest-rate activity dating to 2000. The current spread between the two-year Treasury note and the 10-year Treasury bond is 21 basis points, which is 140 basis points below the average spread of 161 basis points. At the short end of the yield curve, the current spread between the two-year Treasury note and the five-year Treasury note is three basis points, compared to a historical average of 79 basis points. The story is similar at the long end: the current spread between the 10-year Treasury bond and the 30-year Treasury bond is 45 basis points, compared to the historical average of 80 basis points. The implications from the tight spreads have been recognized by the Federal Reserve, which has been cutting rates. We think the Fed is better off remaining on the sideline into 2020, as opposed to cutting rates. Though fears over trade could slow economic growth, recent data (payrolls, in particular) has been solid. We think the Fed should preserve its firepower for bigger crises down the road.

We last talked about the Financial (XLF) sector about three weeks ago, suggesting we could see some absolute performance. Our tepid excitement was due to the chart as well as some better-than-expected quarterly numbers from big banks, despite ongoing worries of a flat yield curve. In other posts, we talked about the possibility that interest rates along the whole curve would rise (happening), which would steepen the curve and help banks -- where some sector participants haven't gone anywhere since the late 1990's.

We last talked about the Financial (XLF) sector about three weeks ago, suggesting we could see some absolute performance. Our tepid excitement was due to the chart as well as some better-than-expected quarterly numbers from big banks, despite ongoing worries of a flat yield curve. In other posts, we talked about the possibility that interest rates along the whole curve would rise (happening), which would steepen the curve and help banks -- where some sector participants haven't gone anywhere since the late 1990's.

The major indices are down at midday on Wednesday amid continued earnings and M&A news. Uber was down as much as 8% on the day after the ride-sharing company's post-IPO lockup ended this morning. Industries doing well today include Independent Power & Renewable Electricity Producers, Personal Products, and Food Products. Industries showing weakness include Real Estate Management & Development, Construction Materials, and Leisure Products. The VIX is down 0.02 to 13.08 after the previous close of 13.10. The Dow fell 0.2%, the S&P 0.2%, and the Nasdaq 0.5%. Crude oil traded near $56.50 per barrel, while gold rose $10 to $1494 per ounce.

The major indices are down at midday on Wednesday amid continued earnings and M&A news. Uber was down as much as 8% on the day after the ride-sharing company's post-IPO lockup ended this morning. Industries doing well today include Independent Power & Renewable Electricity Producers, Personal Products, and Food Products. Industries showing weakness include Real Estate Management & Development, Construction Materials, and Leisure Products. The VIX is down 0.02 to 13.08 after the previous close of 13.10. The Dow fell 0.2%, the S&P 0.2%, and the Nasdaq 0.5%. Crude oil traded near $56.50 per barrel, while gold rose $10 to $1494 per ounce.

Copper, once known as Dr. Copper when it used to do a good job forecasting the economy, is trying to bottom. Whether this has anything to do with a stock market at all-time highs or a possible trade resolution (leading to a better economy) is anyone's guess. But there are factors that favor the metal going higher, starting with the chart pattern.

Copper, once known as Dr. Copper when it used to do a good job forecasting the economy, is trying to bottom. Whether this has anything to do with a stock market at all-time highs or a possible trade resolution (leading to a better economy) is anyone's guess. But there are factors that favor the metal going higher, starting with the chart pattern.

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate market-beating returns going forward. For one thing, most smaller companies are often more focused on domestic operations and may not be exposed to the uncertainty surrounding the ongoing trade wars. For another, the long-term record favors small-caps over large-caps. Since 2003, the Russell 2000 Index has climbed 260%, compared to an advance of 189% for the Russell 1000 Value Index. But small-caps can be risky. Large-caps outperformed small-caps in nine of the 16 years of our test period. Annual returns were negative four times for both indices, but the average decline for small-caps was 18% in down years versus an average 12% annual decline for large-caps in down years. The standard deviation for monthly returns was 5.29% for small-caps over the 15-year period, versus 3.89% for large-caps. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 15%-20% of the U.S. stock market's capitalization is comprised of small- and mid-cap stocks.

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate market-beating returns going forward. For one thing, most smaller companies are often more focused on domestic operations and may not be exposed to the uncertainty surrounding the ongoing trade wars. For another, the long-term record favors small-caps over large-caps. Since 2003, the Russell 2000 Index has climbed 260%, compared to an advance of 189% for the Russell 1000 Value Index. But small-caps can be risky. Large-caps outperformed small-caps in nine of the 16 years of our test period. Annual returns were negative four times for both indices, but the average decline for small-caps was 18% in down years versus an average 12% annual decline for large-caps in down years. The standard deviation for monthly returns was 5.29% for small-caps over the 15-year period, versus 3.89% for large-caps. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 15%-20% of the U.S. stock market's capitalization is comprised of small- and mid-cap stocks.

In recent months, we opined that the Federal Reserve was behind the curve and needed to lower the federal funds rate based on the action of both short and long Treasury rates. The Fed, in late July, cut rates by only 25 basis points (bps) to a current target rate of 2.00%-2.25%. Since that cut, the whole yield curve has gone parabolic (price up, yield down) setting up some interesting data points.

In recent months, we opined that the Federal Reserve was behind the curve and needed to lower the federal funds rate based on the action of both short and long Treasury rates. The Fed, in late July, cut rates by only 25 basis points (bps) to a current target rate of 2.00%-2.25%. Since that cut, the whole yield curve has gone parabolic (price up, yield down) setting up some interesting data points.

GDP Softens, Earnings Top Expectations as Rally Rolls Along

GDP Softens, Earnings Top Expectations as Rally Rolls Along

United Technologies (UTX: BUY) and Raytheon (RTN: BUY) have agreed to combine in a "merger of equals" that will result in a $74 billion company when the proposed deal closes next year. UTX has been busy with mergers and acquisitions. It recently closed a $23 billion acquisition of Rockwell Collins and is successfully integrating operations. Meanwhile, United Technologies is also proceeding with a plan to split off its two non-aerospace businesses -- Carrier, the HVAC company, and Otis Elevator. Once the UTX-RTN merger is complete, UTX will be a bit more "equal," as UTX owners will hold 57% of the combined stock and UTX CEO Greg Hayes will be the CEO of the new company. In the near term, RTN shareholders are the early beneficiaries, as the offer represents a premium to the previous RTN closing price. Over the long term, we think shareholders of both companies will benefit from a diversified company that has both commercial and government aerospace customers. Our target price on UTX is $155. Below are other companies under Argus coverage in aerospace and defense that may be involved in mergers and acquisitions, or could be affected by the UTX-RTN combination.

United Technologies (UTX: BUY) and Raytheon (RTN: BUY) have agreed to combine in a "merger of equals" that will result in a $74 billion company when the proposed deal closes next year. UTX has been busy with mergers and acquisitions. It recently closed a $23 billion acquisition of Rockwell Collins and is successfully integrating operations. Meanwhile, United Technologies is also proceeding with a plan to split off its two non-aerospace businesses -- Carrier, the HVAC company, and Otis Elevator. Once the UTX-RTN merger is complete, UTX will be a bit more "equal," as UTX owners will hold 57% of the combined stock and UTX CEO Greg Hayes will be the CEO of the new company. In the near term, RTN shareholders are the early beneficiaries, as the offer represents a premium to the previous RTN closing price. Over the long term, we think shareholders of both companies will benefit from a diversified company that has both commercial and government aerospace customers. Our target price on UTX is $155. Below are other companies under Argus coverage in aerospace and defense that may be involved in mergers and acquisitions, or could be affected by the UTX-RTN combination.

Lower short-term treasury yields combined with lower long-term yields have pushed the entire yield curve lower, with the spread between the two-year and 10-year yields remaining about the same since November. Both the level of rates and the narrow yield-curve spread have led to fears about the stock market as well as the economy.

Lower short-term treasury yields combined with lower long-term yields have pushed the entire yield curve lower, with the spread between the two-year and 10-year yields remaining about the same since November. Both the level of rates and the narrow yield-curve spread have led to fears about the stock market as well as the economy.

Spreads in the yield curve remain tight. This suggests economic growth may slow in quarters ahead. We base our conclusions on analysis of interest-rate activity dating to 2000. The current spread between the 2-year Treasury note and the 10-year Treasury bond is 20 basis points, 140 bps below the average spread. At the short end of the yield curve, the spread between the 2-year Treasury Note and the 5-year Treasury Note is zero basis points, compared to a historical average of 79. The story is similar at the long end: the spread between the 10-year Treasury Bond and the 30-year Treasury Bond is 45 basis points compared to the historical average of 80. The implications from tight spreads have been recognized by the Fed. In fact, the latest talk from the Fed focuses on inflation -- which is lower than the 2.0% Fed target and could be fodder for a rate cut. Though fears over a trade war could slow economic growth, the recent data has been strong. We think the Fed should preserve its firepower and we continue to look for the central bank to raise rates one more time over the next two years. By 2020, the Fed's balance sheet should be smaller as it continues to unwind quantitative easing, further bolstering its tool chest.

Spreads in the yield curve remain tight. This suggests economic growth may slow in quarters ahead. We base our conclusions on analysis of interest-rate activity dating to 2000. The current spread between the 2-year Treasury note and the 10-year Treasury bond is 20 basis points, 140 bps below the average spread. At the short end of the yield curve, the spread between the 2-year Treasury Note and the 5-year Treasury Note is zero basis points, compared to a historical average of 79. The story is similar at the long end: the spread between the 10-year Treasury Bond and the 30-year Treasury Bond is 45 basis points compared to the historical average of 80. The implications from tight spreads have been recognized by the Fed. In fact, the latest talk from the Fed focuses on inflation -- which is lower than the 2.0% Fed target and could be fodder for a rate cut. Though fears over a trade war could slow economic growth, the recent data has been strong. We think the Fed should preserve its firepower and we continue to look for the central bank to raise rates one more time over the next two years. By 2020, the Fed's balance sheet should be smaller as it continues to unwind quantitative easing, further bolstering its tool chest.

Trade Turbulence Tosses Bull Market off Course

Trade Turbulence Tosses Bull Market off Course

A new generation of consumers - the Millennials - has become the largest demographic cohort in the

Return of Government Data Quelling Economic Fears

Return of Government Data Quelling Economic Fears

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate returns going forward. For one thing, most smaller companies are often more focused on domestic operations and may not be exposed to the uncertainty surrounding the trade wars. For another, the long-term record favors small-caps over large-caps. Since 2003, the Russell 2000 Index has climbed 260%, compared to an advance of 189% for the Russell 1000 Value Index. But small-caps can be risky.

Mid-cap stocks have sprinted out of the starting gate in 2019, gaining 11% year to date compared to the S&P 500's increase of 8%. Although large-caps have outperformed over the past 12 months, small- and mid-caps may be in a better position to generate returns going forward. For one thing, most smaller companies are often more focused on domestic operations and may not be exposed to the uncertainty surrounding the brewing trade wars. For another, the long-term record favors small-caps over large-caps. Since 2003, the Russell 2000 Index has climbed 300%, compared to an advance of 217% for the S&P 500. This week's list includes stocks with market caps below $10 million that are on the Argus BUY list and are included in our Mid-Cap Model Portfolio.

Mid-cap stocks have sprinted out of the starting gate in 2019, gaining 11% year to date compared to the S&P 500's increase of 8%. Although large-caps have outperformed over the past 12 months, small- and mid-caps may be in a better position to generate returns going forward. For one thing, most smaller companies are often more focused on domestic operations and may not be exposed to the uncertainty surrounding the brewing trade wars. For another, the long-term record favors small-caps over large-caps. Since 2003, the Russell 2000 Index has climbed 300%, compared to an advance of 217% for the S&P 500. This week's list includes stocks with market caps below $10 million that are on the Argus BUY list and are included in our Mid-Cap Model Portfolio.

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate returns going forward. For one thing, most smaller companies are often more focused on domestic operations and may not be exposed to the uncertainty surrounding the trade wars. For another, the long-term record favors small-caps over large-caps. Since 2003, the Russell 2000 Index has climbed 260%, compared to an advance of 189% for the Russell 1000 Value Index. But small-caps can be risky.

Large-caps have outperformed over the past 12 months, but small- and mid-caps may be in a better position to generate market-beating returns going forward. For one thing, most smaller companies are often more focused on domestic operations and may not be exposed to the uncertainty surrounding the ongoing trade wars. For another, the long-term record favors small-caps over large-caps. Since 2003, the Russell 2000 Index has climbed 260%, compared to an advance of 189% for the Russell 1000 Value Index. But small-caps can be risky. Large-caps outperformed small-caps in nine of the 16 years of our test period. Annual returns were negative four times for both indices, but the average decline for small-caps was 18% in down years versus an average 12% annual decline for large-caps in down years. The standard deviation for monthly returns was 5.29% for small-caps over the 15-year period, versus 3.89% for large-caps. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 15%-20% of the U.S. stock market's capitalization is comprised of small- and mid-cap stocks.