Small caps lead stock surge

11/08/21
  • November starts five-for-five, small caps join record-high club
  • Jobs rebound, Fed locks in taper, oil swings
  • This week: Inflation data (CPI and PPI), Veterans Day

The US stock market kicked off November the way it wrapped up October—with bulls firmly in charge.

And it did it as the Fed officially announced that, later this month, it would begin scaling back the monthly bond purchases it has used to support the economy for the past 20 months. The S&P 500 (SPX) hit new record highs each day to log its strongest week since June:

Chart 1: S&P 500 (SPX), 10/1/21–11/5/21. S&P 500 (SPX) price chart. Five days, five record highs.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


The headline: Market rings up more records as Fed begins to taper and jobs market bounces back.

The fine print: Friday’s employment report may have exceeded expectations by showing the US economy added 531,000 jobs in October (81,000 more than expected), but the bigger story may have been the upward revision of September’s number from a weak 194,000 to a robust 312,000. In its announcement last week, the Fed cited a stronger labor market as a prerequisite for hiking interest rates.1

The number: $15 billion, the monthly reduction in the Fed’s bond purchases.

The move: In a week with no shortage of notable price swings, Avis Budget (CAR) took the prize, more than tripling on Tuesday from $171.46 to an intraday high of $545.11 before closing at $357.17 for a 108% gain. The stock then gave back nearly half of that surge by Friday, when it closed at $297.46.

The scorecard: The small-cap Russell 2000 (RUT) scored its first record highs—and best week—since March:

US stock index performance table for week ending 11/5/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


Sector roundup: The strongest S&P 500 sectors last week were consumer discretionary (+5%), information technology (+3.3%), and materials (+3.1%). The weakest sectors were health care (-0.75%), financials (-0.7%), and utilities (+0.5%).

Highlight reel: Ani Pharmaceuticals (ANIP) +50% to $55.89 on Monday, iRhythm Technologies (IRTC) +59% to $122.12 on Wednesday. On the downside, Chegg (CHGG) -49% to $32.12 on Tuesday, Deciphera Pharmaceuticals (DCPH) -76% to $8.82 on Friday.

Futures action: December WTI crude oil (CLZ1) suffered its biggest down day since July last Wednesday—and hit a nearly one-month low of $78.25/barrel on Thursday—before ending the week with a 3.2% rally to close at $81.27. December gold (GCZ1) also jumped on Friday, offsetting an otherwise lackluster week to close at a two-month high of $1,816.80/ounce. Biggest up moves: December E-Mini Russell 2000 (RTYZ1) +6.1%, December E-Mini S&P Midcap (EMDZ1) +3.9%. Biggest down moves: December cheese (CSCZ1) -5.4%, March cocoa (CCH2) -5.1%.

Coming this week

This week’s numbers include:

Today: Employment Trends Index
Tuesday: NFIB Small Business Optimism Index, Producer Price Index (PPI)
Wednesday: Consumer Price Index (CPI), Wholesale Inventories
Thursday: Veterans Day (stock and futures markets open, banks closed)
Friday: Michigan Consumer Sentiment (preliminary), JOLTS (job openings), Five year inflation expectations

Earnings this week include:

Today: Roblox (RBLX), Callaway Golf (ELY), Trade Desk (TTD), Five9 (FIVN), Freshpet (FRPT), Virgin Galactic (SPCE), PayPal (PYPL)
Tuesday: Beam Therapeutics (BEAM), Plug Power (PLUG), BioNTech (BNTX), Scientific Games (SGMS), D.R. Horton (DHI), Fubotv (FUBO), International Game Technology (IGT), Workhorse (WKHS), Nio (NIO)
Wednesday: Applovin (APP), Dutch Bros. (BROS), Bumble (BMBL), SoFi Technologies (SOFI), Beyond Meat (BYND), monday.com (MNDY), Wendy's (WEN), Beazer Homes (BZH)
Thursday: Li Auto (LI), Tapestry (TPR), Sally Beauty (SBH), Coupang (CPNG), Luminar (LAZR), Blink Charging (BLNK)
Friday: AstraZeneca (AZN), Warby Parker (WRBY), Buckle (BKE), Foot Locker (FL)

This week’s IPOs include: Backblaze (BLZE), CI&T (CINT), Expensify (EXFY), FlexEnergy Green Solutions (FLXE), Hertz Global Holdings (HTZ), Lulu's Fashion Lounge (LVLU), Mynaric (MYNA), Rivian Automotive (RIVN), Third Coast Bancshares (TCBX), Weave Communications (WEAV)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

The past seven days: S&P on the run

The SPX has made a higher high, low, and close each of the past seven trading days, while gaining 3.2%.

Not impressed? To get an idea of how exceptional this run is, over the course of more than 15,000 seven-day trading periods since 1960, the SPX has closed higher seven or more days in a row only 165 other times. Shrink this pool to include just the runs with higher highs and lows and a 3% or larger gain, and you’re down to only 19 runs that have matched or exceeded the current one—roughly one for every 800 or so seven-day periods.2

An interesting sidebar: While the SPX was higher more than 63% of the time five days after these runs, it closed higher the first day (i.e., today) a little less than half the time. Also, on Friday the Cboe Volatility Index (VIX) closed higher for the second day in a row—a potential signal the options market was expecting increased volatility even though stocks were rallying.

 

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1 Reuters. Fed sings the 'transitory' inflation refrain, unveils bond-buying 'taper'. 11/3/21.
2 All figures reflect S&P 500 (SPX) daily price data, 12/31/59–11/5/21. Supporting document available upon request.

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