Micro-cap Market Report: July 20, 2013 – Despite some disappointing earnings reports at the end of the week, U.S. stocks, including the micro-caps, found a way to notch another solid weekly performance. The S&P 500 gained 2/3% on the week and that was enough to send the benchmark U.S. index to another record closing. Amid a flurry of earnings reports throughout the week, the Dow Jones Industrial Average closed the week slightly higher as well.

Leading tech stocks tank NASDAQ

The NASDAQ Composite was the laggard of the group with a weekly loss. As we just noted, there were some less-than-stellar earnings report that trickled in at the end of the week and they came courtesy of the technology sector. That could be a sign that one of our favorite micro-cap sectors is ready for a breather. After Intel (NASDAQ: INTC) disappointed earlier in the week, Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) did the same Thursday after the close, leading to a glum finish for the NASDAQ on Friday.

Micro-caps setting records too

Overall, it was still a solid week for micro-caps on a broad level as the iShares Russell Microcap Index Fund (NYSE: IWC) gained 1.9%. The Guggenheim Wilshire Micro-Cap ETF (NYSE: WMCR) was no slouch either with a 1.7% gain.

The Markets @ 7/19/2013
Index	Close	Weekly	% Change	YTD Change	YTD%
DJIA	15543.74	79.44	0.005137	2439.6	0.18617
NASDAQ	3587.61	-12.47	-0.00346	568.1	0.188143
S&P 500	1692.09	11.9	0.007083	265.9	0.186441
NYSE Comp	9618.51	120	0.012634	1175	0.13916
NYSE MKT	2353.87	23.8	0.010214	-1.79	-0.00076
RUS 2000	104.31	1.63	0.015875	20.23	0.240604
RUS MICRO	66.64	1.21	0.018493	14.32	0.2737
VANG INTL	47.92	0.55	0.011611	1.62	0.034989
CHINA INDEX	5320.99	270.04	0.053463	882.47	0.198821
EMERG MKTS	6510.74	101.44	0.015827	-529.23	-0.07518

 

Market Report

There were some important economic data points out during the week, but the Federal Reserve again loomed large as investors were treated to two days of congressional testimony by Fed Chairman Ben Bernanke. Bernanke noted the Fed’s bond-buying program will remain in place for the foreseeable future, but tapering could commence later this year and easing could be halted in 2014.

In economic news, the Commerce Department said U.S. housing starts fell 9.9% to a seasonally adjusted annual rate of 836,000 unit in June, the lowest reading since August 2012. Analysts expected starts to rise to 959,000 units. Bad weather was cited as one of the reasons for the slack reading.

On Thursday, the U.S. Labor Department said initial claims for jobless benefits slid by 24,000 to 334,000 last week. The less volatile four-week moving average dropped by 5,250.

The Philadelphia Federal Reserve’s business activity index rose to 19.8 from 12.5 in June. Readings above zero signal expansion.

It was a solid week at the economic office and the forecast calls for some clear sailing for the next couple of weeks in terms of scheduled Fed events. As in there are no major ones, but it would be wise for micro-cap investors to pay close attention to the results of this weekend’s elections in Japan. These days, the Bank of Japan is the next most important central bank after the Fed.

Big Green Numbers for Micro-caps, Small Green Ones for Blue-chips… China Rebounds Big-time!

The S&P gained 0.71% for the week and is headed toward a 19% YTD gain. The DJIA added 0.51% last week and the YTD gain is a healthy 18.62%.

However…the NASDAQ spoiled the Big Boy’s party this week with a 0.35% loss… the YTD gains dropped back to 18.81%.

Internationals and the Emerging Markets posted some nice numbers for the week… plus 1.16% and 1.58% respectively. However, the big mover was the NASDAQ Golden Dragon Index which posted a blistering 5.35% gain for the week to move close to a 20% YTD gain at 19.88.

OK…here’s our mantra at MicroCap MarketPlace – micro-caps continue to reward risk

The iShares Russell Microcap Index and the Guggenheim Wilshire Micro-Cap ETF continue to set new 52-week highs at 27.37% and 30.36% respectively. And the Russell 2000 gained 1.59% for the week and is up over 24% YTD.

Just like last week…oil was up and so was gold

Oil prices closed Friday at $108.05 (up $2.10 for last week)… gold inched closer to the $1300 level; closing the week at $1,293.30, up $15.50.

The US Dollar was off again – $0.0044 to close at 0.7609 euros.

Bonds are up… then down… then up, then up again. The 10-year bond gained $0.95 to close at $93.58 and the 30-year bond gained $1.30 to close at $87.27.

The Bottom Line for Stocks

With the S&P 500 continuing to climb higher, the chorus of naysayers calling for a pullback grows ever louder. We cannot guarantee that will happen, but it is worth noting, particularly for micro-cap investors, the latter half of July is usually a volatile period for stocks.

And August, historically a bad month for stocks, is right around the corner. While August itself can be bad for stocks, it can also be a good month to do some buying in select sectors if you plan on holdings those stocks for more than just a few months.

With that in mind, this is a good time to reconsider micro-caps health and biotech names. Stepping away from seasonal trends, gold miners are finally starting to show some promise and oil and gas names remain strong.

Research and Editorial Staff
MicroCap MarketPlace
Mike Casson, Executive Editor

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