Micro-caps Impress… S&P 500 Sets New Record

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imagesCA5BE2T7 Micro-Cap Market Report: August 5, 2013 – Following a tepid July jobs report, U.S. stocks, including micro-caps were able to eke out Friday gains with the S&P 500 rising to yet another record high. For the week, the benchmark U.S. index gained almost 1.1%, closing above the psychologically important 1,700 level in the process.

The Dow Jones Industrial Average added 0.64% while the NASDAQ Composite jumped over 2%, buoyed by a string of encouraging earnings reports from high-flying Internet stocks.

On Friday, the Labor Department said the U.S. economy added 162,000 new jobs last month and the unemployment rate fell to 7.4%, a four-year low. The added number of jobs last month missed expectations, which in a perverse way is O.K. because that means the Federal Reserve cannot be too hasty in tapering its quantitative easing program. The lower the taper fear, the higher stocks go. It is that simple.

Micro-caps moving higher… rewarding risk takers

For the most part, it was not a week long on risk appetite, but it was not bereft of it, either. That was enough to lift micro-caps as a group. The iShares Russell Microcap ETF (NYSE: IWC) gained 0.21% for the week while the Guggenheim Wilshire Micro-Cap ETF (NYSE: WMCR) added 0.37%. Both are setting or flirting with new all-time highs.

The Markets @ 8/2/2013
Index Close Weekly % Change YTD Change YTD%
DJIA 15658.36 99.53 0.64% 2554.22 19.49%
NASDAQ 3689.59 76.43 2.12% 670.08 22.19%
S&P 500 1709.67 18.02 1.07% 283.48 19.88%
NYSE Comp 9690.07 69.94 0.73% 1246.56 14.76%
NYSE MKT 2363.33 9.84 0.42% 7.67 0.33%
RUS 2000 105.16 1.04 1.00% 21.08 25.07%
RUS MICRO 66.99 0.14 0.21% 14.67 28.04%
VANG INTL 48.52 0.35 0.73% 2.22 4.79%
CHINA INDEX 5785.21 241.12 4.35% 1346.69 30.34%
EMERG MKTS 6521.55 -39.53 -0.60% -518.42 -7.36%

 

Market Report

In other economic news out during the week, the Commerce Department said U.S. consumer spending rose 0.5% last month following a 0.2% increase in June. Economists expected consumer spending to rise 0.5% so that was on target.

The Bureau of Economic Analysis said personal incomes rose 0.3% in July. Economists expected a 0.4% increase. On Thursday, the Institute for Supply Management said its July manufacturing index soared to 55.4% vs. 50.9% in June, good for the best reading since 2011. Economists expected a July reading of 52%. Readings above 50% indicate expansion.

The Commerce Department said the U.S. economy grew 1.7% in the second quarter. The first-quarter growth rate was revised down to 1.1% from 1.8%. The average for the last 12 months remained at 1.4%.

Clearly, it was a busy week on the economic data front. When stocks are able to close during a week that features a GDP update, jobs report and Federal Reserve headlines, that is an encouraging sign… particularly as we get deeper into August, a month that is not usually kind to stocks.

NASDAQ leads major indexes

The big mover this week for the majors was the NASDAQ Composite which posted a nice gain of 2.12% as it moved above a 22% gain YTD.

China Index up 46% in 12 months

The big mover again this week for all the indexes we follow was the NASDAQ Golden Dragon China Index which posted another 4%+ gain of 4.35% as it cruised thru a 30% gain YTD. This China index has made a strong recovery in the past 12 months… up 46.43% from a 52 week low of 3,950.90 on 8/6/12.

Remember we’re talking about U.S. traded stocks, not those traded on the Hong Kong, Shanghai or Shenzhen exchanges… the NASDAQ Golden Dragon China Index is designed to provide insight and access to the unique economic opportunities taking place in China while still providing the transparency offered with U.S. listed securities.

The iShares Russell Microcap Index and the Guggenheim Wilshire Micro-Cap ETF also moved higher…flashing 52-week highs at 28.04% and 31.66% respectively. The Russell 2000 reversed its trend and gained 1.00% last week and has a 25.07% YTD gain.

Here’s a reversal of our seesaw for this week… Oil was up and gold was down

Oil prices closed Friday at $106.94 (up $2.24 for the week)… gold slipped back toward the $1300 level; closing the week at $1,310.60, off $11.10.

The US Dollar was just about even: – $0.0001 for the week to close at 0.7293 euros.

Bonds continued moving down: The 10-year bond lost $0.33 to close at $92.69 and the 30-year bond lost $1.16 to close at $85.36.

The Bottom Line for Stocks

Earnings season is winding down and the week ahead will not be nearly as active on the economic data front as the one we just completed. Stocks are off to a good August start, surprising when considering the first nine days of August are usually bad for equities.

Assuming there are no major surprises ahead, micro-cap sectors that look particularly appealing for the rest of this month include health care and staples as low beta plays. As a group, micro-cap banks continue to impress, though the same cannot be said of oil and natural gas names. An August decline for that sector should represent a decent buying opportunity after Labor Day.

Research and Editorial Staff
MicroCap MarketPlace
Mike Casson, Executive Editor

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