Benchmark Indexes Setting Records… Micro-caps Sizzle

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imagesCAGROI41Micro-cap Market Report – July 15, 2013 – Big Board Stocks and micro-caps closed out the week on Friday in lethargic fashion with the S&P 500 posting just a modest gain, but any gains are better than losses. However, the S&P 500 finished the week at a record closing high with its best five day performance since January.

All of that was good enough to lead the benchmark U.S. index higher for a third straight week. Also, our two bench mark micro-cap indexes are red-hot with a 25.06% and 28.14% YTD gains.

Despite some issues specific to Boeing (NYSE: BA), the Dow Jones Industrial Average closed Friday with a small gain, but at an all-time high close… and up 328.46 for the week. The Nasdaq Composite closed over 3600 to post a new 52-week high and its best showing since October 2000.

What is important about this rally is what sectors have recently been showing strength and we’re pleased to say at least two groups we pinned for leadership roles months ago have proven to be winners: Financial Services and Technology.

Obviously, that has been good news in terms of stoking risk appetite and increased animal spirits usually buoy gains in micro-caps. The iShares Russell Microcap ETF (NYSE: IWC) gained almost 3% on the week while the Guggenheim Wilshire Micro-Cap ETF (NYSE: WMCR) soared nearly 3.3%.

The Markets @ 7/12/2013
Index Close Weekly % Change YTD Change YTD%
DJIA 15464.3 328.46 2.17% 2360.16 18.01%
NASDAQ 3600.08 120.7 3.47% 580.57 19.23%
S&P 500 1680.19 48.3 2.96% 254 17.81%
NYSE Comp 9498.51 284.33 3.09% 1055 12.49%
NYSE MKT  2330.07 55.66 2.45% -25.59 -1.09%
RUS 2000 102.68 3.01 3.02% 18.6 22.12%
RUS MICRO 65.43 1.87 2.94% 13.11 25.06%
VANG INTL 47.37 1.75 3.84% 1.07 2.31%
CHINA INDEX 5050.95 149.27 3.05% 612.43 13.80%
EMERG MKTS 6409.3 155.65 2.49% -630.67 -8.96%

 

Market Report

It was a slow week on the economic news front. As we’ve previously mentioned, that is not necessarily a bad thing. Don’t fret because second-quarter earnings season is underway and that means there are plenty of catalysts available to boost micro-cap stocks well into the summer..

In economic news out this week, the U.S. Labor Department said initial claims for jobless benefits rose to 360,000 last week, the highest level in two months. Economists expected a reading of 340,000 claims. The less volatile four-week moving average rose 6,000 last week to 351,750. That is the first time since June the four-week average was above 350,000.

On Friday, a Labor Department report showed U.S. wholesale prices rose 0.8% last month, the biggest gain since September 2012. That follows a 0.5% increase in May. Economists expected a June increase of 0.5%.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 83.9 in July from 84.1 in June. Economists expected an initial July reading of 84.7.

Green numbers for Micro-caps and Blue-chips… Emerging Markets joined in this party too!

The S&P gained 2.96% for the week and is close to an 18% YTD gain. The DJIA jumped up 2.17% last week and the YTD gain moved north of 18%.

However…the NASDAQ led the Big Boy parade this week with a 3.47% gain and is now over 19% YTD.

Internationals, China and the Emerging Markets all posted good numbers for the week and of the three, only the emerging market sector is still showing a loss YTD.

Let me repeat this…micro-caps continue to reward risk

The iShares Russell Microcap Index and the Guggenheim Wilshire Micro-Cap ETF set new 52-week highs at 25.06% and 28.14% respectively. Plus the Russell 2000 gained 3.02% for the week and is up 22.12% YTD.

Oil was up and so was gold… YEA!

Oil prices closed Friday at $105.95 (up $2.73 for the week)… gold reversed its direction and is headed back to the $1300 level; closing the week at $1,277.80, up $64.90.

The US Dollar was off slightly – $0.0141 to close at 0.7653 euros.

Bonds are up… then down… then up. The 10-year bond gained $0.96 to close at $92.63 and the 30-year bond gained $0.50 to close at $85.97.

The Bottom Line for Stocks

Of course we can’t gloss over the fact that Federal Reserve Chairman Ben Bernanke spoke on Wednesday after the close of U.S. markets in attempt to assure investors tapering of quantitative easing is not right around the corner. This amounts to a mixed message and markets, particularly micro-caps as a group, hate uncertainty.

With that, we acknowledge precious metals miners may look more attractive today than at any point in the past few months, but that is not saying much and we continue to be cautious with these micro-caps. Additionally, there can be no guarantees Treasury yields will continue to decline, but the good news there is rising rates bolster our bullish view on micro-cap banks.

In addition to banks and tech, recent price action cements the notion that opportunities are bountiful with micro-cap consumer discretionary and energy names.

Research and Editorial Staff
MicroCap MarketPlace
Mike Casson, Executive Editor

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