Microcaps Were Smoking Hot as Markets Turn In a Strong Week

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red arrow up imagesMicrocap Market Report: April 29, 2013 – It was another wild week of corporate earnings and a deluge of economic data, but when it was all said and done, U.S. stocks including our favorites, the microcaps, did finish last week higher. That came despite some modest losses on Friday. For the week, the S&P 500 gained 1.74 percent while the Nasdaq was higher by 2.28 percent. The Dow Jones Industrial Average added just over one percent.

S&P 500 looking strong

The S&P 500 is up close to one percent this month, but has been on a tear since April 18 and has surged 2.6 percent in the last seven trading days. Profit at S&P 500 companies gained 1.1 percent in the first three months of the year, according to analysts’ projections compiled by Bloomberg. That compares with last week’s projection for a decline of 1.1 percent, the news agency reported.

Microcaps smoking hot

In a sign that risk appetite is indeed alive and well, the iShares Russell Microcap Index Fund (NYSE: IWC) gained 2.4 percent on the week while the Guggenheim Wilshire Micro-Cap ETF (NYSE: WMCR) jumped 2.6 percent. The Guggenheim Wilshire Micro-Cap ETF is now just 1.3 percent below its 52-week high.

The Markets @ 4/26/2013
Index Close Weekly % Change YTD Change YTD%
DJIA 14712.55 165.04 1.13% 1608.41 12.27%
NASDAQ 3279.26 73.2 2.28% 259.75 8.60%
S&P 500 1582.24 26.99 1.74% 156.05 10.94%
NYSE Comp 9169.9 175.78 1.95% 726.39 8.60%
NYSE MKT  2398.13 68.68 2.95% 42.47 1.80%
RUS 2000 938.98 37.04 4.11% 89.63 10.55%
RUS MICRO 57.93 1.33 2.35% 5.61 10.72%
VANG INTL 48.72 1.48 3.13% 2.42 5.23%
CHINA INDEX 4468.76 156.91 3.64% 30.24 0.68%
EMERG MKTS 6964.54 67.22 0.97% -75.43 -1.07%

Market Report

It was another busy week on the economic data front with a slew of reports leading up to the “big heavies” of GDP and consumer confidence on Friday. On Monday, the National Association of Realtors said existing home sales dropped 0.6% to a seasonally adjusted annual rate of 4.92 million in March from a downwardly revised 4.95 million in February. Economists expected an increase in March, but the number was still higher by 10.3% on a year-over-year basis.

On Tuesday, the Commerce Department said new home sales rose 1.5% last month to a seasonally adjusted annual rate of 417,000 units following a 7.6% drop in February. Analysts expected the March reading to rise to 420,000 units.

The following day, the Commerce Department said durable goods orders fell 5.7% last month following a 4.3% increase in February. Orders excluding non-defense aircraft rose 0.2% missing economists’ expectations for 0.4% increase. Shipments of core capital goods rose 0.3% in March, but the February reading was revised lower to an increase of 1.2% from an initial reading of 1.9%.


GDP misses mark and spoils the Friday party

And on Friday, the Commerce Department said U.S. GDP grew 2.5% in the first quarter, missing the consensus estimate of 3% growth. The Thomson Reuters/University of Michigan Survey of consumer confidence fell 2.8% to 76.4 in April. That reading is the same as April 2012. Economists expected a reading of 73.5.

Clearly, the causes for concern on the data front are the GDP and consumer confidence numbers. Those reports go hand-in-hand because it is the consumer that accounts for 70 percent of U.S. GDP. Said another way, consumer sentiment and confidence must move higher to stoke risk appetite.

I’ve said this before…what a difference a week makes

We had a complete reversal in every index we follow here at MicroCap MarketPlace. Just look at the chart. You gotta’ love those green numbers.

Oil prices surprised to the high side – WTI Crude Oil closed at $93.00 last week…+$4.99.
The US Dollar had very modest gains…like a + $0.0014 to close at 0.7675 euros.
Bonds moved higher too – The 10-year bond gained $0.34 to close at $102.98 and the 30-year bond was up $0.36 to close at $105.17.
Gold reversed its downward slide… gaining $58.30 for the week to close at $1,453.60. Some reports indicated a lot more Asian buying propped up the price. Here’s one we found on Bullion Vault.

Over in Asia, “there’s panic buying [of physical gold products],” says Ronald Leung, chief dealer at Hong Kong’s Lee Cheong Gold Dealers.

“Everybody is buying gold….the physical market is still tight. The thing is that there are no immediate stocks.”

Wholesale dealers have this week reported premiums over the spot gold price of around $3 an ounce in Hong Kong and Singapore, and as high as $10 in Mumbai.

“You must be prepared to pay up,” one Singapore dealer told newswire Reuters this morning.

“I would think premiums will remain high in the short-term because of a shortage in immediate stocks. You have to wait for three days if you want to get gold now.”

The Bottom Line for Stocks

We saw a very nice rebound in gold and silver last week, though it was not enough to establish an overtly bullish posture on micro-cap miners. That said, adventurous investors may want to consider small positions in the micro-cap gold and silver names.

The setups are still more favorable with micro-cap natural gas names following last week’s pullback in that commodity. We’re somewhat tepid on oil microcaps until futures rebound in earnest, but opportunities remain with high-quality names as well as micro-cap banks and health care stocks.

Research and Editorial Staff
MicroCap MarketPlace
Mike Casson, Executive Editor


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