Micro-caps Climbed Higher than the Big-boys!

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Microcap Leadrs Micro-cap Market Report: July 1, 2013 – June and the second quarter came to an end Friday with the bigger-cap stocks ending the month in ugly fashion; but there is some good news…micro-caps pretty much held their own. And, now that the first half of the year is in the books, we know that the first six months of 2013 was the best first-half performance for U.S. stocks since the go-go days of 1999.

What is disappointing about the S&P 500’s down day to close the week is that Tuesday through Thursday represented the best three-day run for the benchmark U.S. index since January. Even those gains were not enough to prevent a June slide of 1.5%, marking the worst monthly performance for U.S. stocks since October.

For the week, NASDAQ led the three major U.S. indexes, closing up 1.37%. The S&P 500 turned in a 0.87% gain while the Dow Jones Industrial Average moved the needle up 0.74%.

Micro-caps up again

It is fair to say risk appetite was tepid during the just completed week, but micro-caps were able to climb higher. The iShares Russell Microcap Index Fund (NYSE: IWC) jumped 1.45% while the Guggenheim Wilshire Micro-Cap ETF (NYSE: WMCR) added nearly 1%.

The Markets @ 6/28/2013
Index Close Weekly % Change YTD Change YTD%
DJIA 14909.6 110.2 0.74% 1805.46 13.78%
NASDAQ 3403.25 46 1.37% 383.74 12.71%
S&P 500 1606.28 13.85 0.87% 180.09 12.63%
NYSE Comp 9112.7 94.15 1.04% 669.19 7.93%
NYSE MKT  2245.73 6.78 0.30% -109.93 -4.67%
RUS 2000 97 1.02 1.06% 12.92 15.37%
RUS MICRO 61.73 0.88 1.45% 9.41 17.99%
VANG INTL 45.66 0.04 0.09% -0.64 -1.38%
CHINA INDEX 4876.14 155.34 3.29% 437.62 9.86%
EMERG MKTS 6404.71 246.28 4.00% -635.26 -9.02%

Market Report

In economic news, the U.S. Commerce Department said U.S. GDP grew 1.8% in the first quarter, well below the previous estimate of 2.4% growth. Growth in consumer spending was slashed to 2.6% from 3.4%. Only the home construction and government readings were not revised downward.

On Thursday, the National Association of Realtors said its pending home sales index jumped 6.7% to 112.3 last month. Signed contracts are up 12.1% in the past year.

The Commerce Department said personal incomes rose 0.5%, or $69.4 billion, in May. Personal spending increased 0.3%. Economists expected a 0.2% gain in incomes and a 0.4% increase in spending.

The Labor Department said weekly jobless claims fell by 9,000 to 346,000 last week. Economists expected a decline to 345,000 claims. For the four weeks ending June 22, claims declined by an average of 2,750 to 345,750.

On Friday, the Thomson Reuters/University of Michigan’s final reading on June U.S. consumer sentiment was 84.1, well above the initial reading of 82.7. Economists expected a final June reading of 82.8. Chicago are PMI fell to a 51.6 reading from 58.7 in May. Economists expected a June reading of 55. Readings above 50 indicate expansion.

Once again, this batch of economic data was, for the most part, encouraging.

The GDP report was the exception and when it was released, stocks rallied on speculation the tepid growth number will prevent the Federal Reserve from ending its easing efforts. That should have been excellent news for gold and micro-cap miners. It was not, as gold just finished its worst quarter since 1968, reminding us that miners of all shapes and sizes are in trouble.

How about a complete reversal from red to green ink… the major indexes posted reasonable gains but – China and the International Markets blew the doors off!!!

 

The S&P gained just under 1% for the week but is showing a very nice 12.63% YTD gain. The DJIA only gained 0.74% last week… however the YTD gain of 13.78% is most impressive. With a YTD gain of 12.71%, the NASDAQ turned in a strong first-half of the year performance.

 

China had a 3.29% weekly gain and is approaching a 10% YTD gain; the Emerging Markets Index had a 4.00% gain last week but is in negative returns territory at -9.02% YTD.

Micro-caps continue to impress

The Guggenheim Wilshire Micro-Cap continues to lead our group of indexes with a 20.13% gain since Jan 1. The micro-caps are turning in some solid numbers as evidenced by the Russell 2000 flashing a 17.99% YTD gain as the second leader in the club house.

Oil was up and gold lost more ground
Oil prices closed Friday at $96.56 (up $2.87 for the week)… gold seems to be headed to the $1200 level. The yellow stuff was off $67.80 for the week, to close at $1,223.80.
Radio Free Europe/Radio Liberty…aka, www.rferl.org had a fairly detailed explanation for why the price of gold was dropping. They focused on inflation (or the lack thereof) and central bank purchases.

They also had a response to the question of… Is there a limit to how much gold will fall? You can read the answer here: http://www.rferl.org/content/explainer-gold-price-drop/25031620.html

The US Dollar was up + $0.0194 to close at 0.7687 euros.
Bonds re-gained a little ground this week… the 10-year bond was up $0.25 to close at $93.59 and the 30-year bond gained $1.11 to close at $88.45.

The Bottom Line for Stocks

Continuing to harp on the miners theme, if gold spends a significant amount of time below $1,200 an ounce, it would not be surprising to see quite a few small miners go out of business.

In terms of micro-cap sectors that look appealing the moment, consumer discretionary continues to perform well and we’d give financial services a 7.5 out of 10. Energy micro-caps also look poised to deliver some impressive second-half performances.

Research and Editorial Staff
MicroCap MarketPlace
Mike Casson, Executive Editor

 

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