- NASDAQ Composite -0.44% Dow -0.11% S&P 500 -0.37% Russell 2000 +0.36%
- NASDAQ Advancers: 1559 / Decliners: 285
- Today's Volume (vs. Monday) +13.7%
- Crude $58.45 +$0.60, Gold $1496.10 -$8.40, VIX 15.62 +0.35
- NFIB August Small Business Index 103.1 vs consensus of 103.5 and below the 104.7 posted in July
- JOLTS Jobs Openings at 7.217 million vs. consensus 7.331 million
- July revised lower to 7.248 million vs 7.348 previously reported
- Reaction to earnings: FRAN +75%, CASY +1.5%, HDS -4%, CTRP -3%
Markets closed mixed to flat Monday on above average trading volumes. Small cap names outperformed, essentially playing catch-up their larger brethren’s performance. For the month of September, the Russell 2000 Index is up nearly 2% while the S&P 500 is up 1.8%, the Dow up 1.6% and the Nasdaq Composite up 1.5%.
Today equities are off to a slow start. Large caps names are giving back some ground on a lack of major headlines while the small caps are holding onto yesterday’s gains. Apple (AAPL) will host its annual fall event this afternoon which could give a boost to the Tech and large cap space. Remember that AAPL is a major component of the 3 major large-cap indexes carrying a 5.4% weight in the Dow and weighing in at over 8% for the Nasdaq Composite, so definitely a heavy hitter. Currently, the Dow is down 90 points, the Nasdaq down 60 points, the S&P 500 is down 18 points and the Russell 2000 is up 4 points.
This morning only 3 of the 11 major S&P 500 sectors are trading in the green. Energy is outperforming up 1.7% while Real Estate, Tech and Consumer Discretionary names are all down over 1%. Crude oil is up nearly 1%, up for the 5th day in a row and giving a boost to the Energy sector. Gold trades lower, slipping just below the $1500 level. The dollar is higher while the yield on the 10-yr is higher at 1.66%.
The S&P 500 is trading off about 2.2% from its all-time high of 3027.98 made in late July. The index is trading near support of its 50 day simple moving average of 2948. The growth / momentum trade and the value /cyclical trade have gotten some attention recently. Traders seem to be rotating sectors here as the losses we saw in August were essentially erased. Tech has been one of the leaders, but is lagging a bit recently on the crowded trade thesis along with the assumption that some profits are being taken by short term traders following this recent rally. Energy, which has lagged the broader rally, has been gaining momentum these last few days as a beneficiary of this perceived rotation. Michael Block from Third Seven Capital summed it up nicely saying,” We are seeing some rotation – losers like Energy and Financials are rallying here in addition to the Russell’s outperformance. Energy’s move makes sense given the changes going on in Saudi, but Financials may be a case of “beaten up enough” and I have to respect it.” Rotation or profit taking? We shall see as the week plays out.
Brian’s Technical Take
One day or week does not make a trend but there has been a fair amount of coverage about the very recent outperformance of value stocks vs. growth. Yesterday was particularly noteworthy with many momentum names seeing steep declines as the unloved value names, particularly in energy (+1.9%) and finance (1.5%), were on the receiving end of sector rotation/flows.
So far in September the Russell 100 Value Index (RLV) is outperforming the Russell 1000 Growth Index (RLG) by 2.1%, its largest monthly outperformance since October 2018 and 2nd largest since November 2016. While this could certainly be the start of a prolonged rotation, from a technical perspective it is far too early to make that call.
The below weekly period chart is the ratio of the growth index over value (RLG/RLV) which plots the relative performance of the numerator over the denominator. For the majority of time since Q1’17 the growth index has far outperformed value. Value came back into vogue for a brief spell in Q4’18, but since late November growth has been marching higher. In April the ratio broke out to new highs, briefly retested the breakout line the following month in May, and then marched higher to its recent peak in late August where it reached an extreme “overbought” 73 reading in its weekly RSI.
The 40-week sma is down below at the prior high from Q4’18 which provides an additional layer of support if growth’s underperformance continues. Until that level is given up and the ratio dips below its 40-week sma, growth still has the upper hand.
Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.
Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.
Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.