A big week for small caps

The US stock market kicked off summer with a week of fresh records for small caps and a bit of a holding pattern for large caps.

While the S&P 500 (SPX) appeared to end the week in a short-term consolidation, the Russell 2000 (RUT) racked up three straight record highs and closes on Monday, Tuesday, and Wednesday, and topped 1,700 for the first time. The small-cap index was the only major US benchmark to end the week in the green, and it narrowly missed becoming the second US index (along with the Nasdaq 100) to boast a double-digit year-to-date return.

Russell 2000 (RUT) and S&P 500 (SPX), 3/15/18 – 6/22/18. Russell 2000 (RUT) price chart. S&P 500 (SPX) price chart. Record highs.

Source: OptionsHouse

On and off worries about tariffs and trade wars appeared to weigh on stocks, although concerns seem to ebb slightly as the week progressed: President Trump’s threat on Friday to slap 20% tariffs on European cars didn’t totally derail the market, and the SPX rebounded from Thursday’s decline and closed out the day in the plus column.

In pulling back mildly, the SPX twice approached (on Tuesday and Thursday) the early June breakout level noted in “Testing the S&P 500,” which many traders may now view as near-term support. Here’s how the index’s stacked up last week:

Index comparison table for week ending June 22, 2018. S&P 500, Nasdaq 100, Russell 2000, Dow Jones Industrial Average.

Source: OptionsHouse (data)

The market’s lingering “risk-off” posture was again evident in sector performance last week, with a classic defensive sector continuing to get a warm embrace from traders, while recently hot tech got the cold shoulder. The top S&P 500 sectors were Utilities (+2.5%, second straight week at the top), Real Estate (+2.5%), and Energy (+1.5%, amid Friday’s crude oil rally). The worst-performing sectors were Industrials (-3.4%), Materials (-2.1%), and Financials (-1.4%).

Despite the tepid tech background, Facebook (FB) continued to bang out new all-time highs last week, topping $200 and extending the rally from its late-March low to around 33%.

There was a lot of action in futures: August WTI crude oil futures (CLQ8) reversed their recent short-term downtrend by rallying more than 5% on Friday following the conclusion of the OPEC meeting in Vienna and the cartel’s decision to increase output by a million barrels a day starting next month. (The actual number is expected to be closer to 700,000 a day because some countries are unable to increase their current output levels.1)

The crude oil rally pumped up many energy stocks at the end of the week, including ConocoPhillips (COP), which jumped more than 4% on Friday (a day after it retested the support level noted in “Recharge for energy stocks?”).

Copper (HG), silver (SI), and gold futures (GC) all extended their losses from the previous week, although silver and gold managed to gain ground on Friday. Soybean futures (S) plummeted to a nearly 10-year low (841.50) last Tuesday before stabilizing and closing higher on Friday.

The week ahead: In addition to the final two housing numbers for the month, this week’s economic calendar includes GDP and a few consumer data points:

  • Monday: Chicago Fed National Activity Index, New Home Sales
  • Tuesday: S&P Corelogic Case-Shiller HPI, Consumer Confidence
  • Wednesday: Durable Goods Orders, International Trade in Goods, Retail Inventories (Advance), Wholesale Inventories (advance), Pending Home Sales Index
  • Thursday: GDP
  • Friday: Personal Income and Outlays, Consumer Sentiment

Wednesday and Thursday are the big days for earnings announcements this week:

  • Monday: Carnival (CCL),
  • Tuesday: IHS Markit (INFO), JinkoSolar Holding (JKS)
  • Wednesday: General Mills (GIS), Paychex (PAYX), Bed Bath & Beyond (BBBY), Pier 1 Imports (PIR)
  • Thursday: Accenture (ACN), ConAgra (CAG), GMS (GMS), Walgreens Boots Alliance (WBA), KB Home (KBH), NIKE (NKE)
  • Friday: Constellation Brands (STZ)

Futures contracts expiring this week include:

  • Wednesday: July natural gas (NGN8), June gold (GCM8), June copper (HGM8), June palladium (PAM8)
  • Friday: July gasoline RBOB (RBN8), June 30-Day Fed funds (FFM8), June live cattle (LCM8)

Go to the E*TRADE market calendar (logon required) for an up-to-date schedule, along with a complete list of splits, dividends, IPOs, and other market events.

That was a close one. After hobbling through most of last week and falling back into the red for the year, the Dow Jones Industrial Average (DJIA) rallied on Friday to snap an eight-day losing streak—its longest since March 2017—and avoid matching its worst run of consecutive down closes in more than four decades.

Meanwhile, since May 1 the Russell 2000 has closed up 26 of 38 days, and hasn’t had more than two consecutive down days.


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1 Bloomberg.com. OPEC+ to Boost Oil Output After Saudis Secure Deal With Iran. 6/22/18.