Russell 2000 rises, economic moderation: Top market trends
The Dow Jones Industrial Average (^DJI) notched a record close while the S&P 500 (^GSPC) ended the day just below a record high in Monday’s session. Yahoo Finance Reporter Josh Schafer joins Asking for a Trend to discuss his takeaways from the trading day.
First, he points to the continued broadening of the market as a major trend. Energy (XLE), financials (XLF), and industrials (XLI) all led the market’s rally while tech (XLP) came in just shy of the S&P 500 over the last five days.
Next, the Russell 2000 (^RUT) hit its highest level since 2022. As more economic data points to cooling inflation, confidence grows in the potential for a September rate cut, giving small caps a boost.
Finally, the economy is showing signs of overall moderation. As June’s retail sales report is set to be released on Tuesday, Wall Street is expecting sales to fall about 0.2%. Schafer explains that if the print comes in line with expectations, it would serve as yet another data point showing that the economy is responding to higher interest rates. This would also give the Federal Reserve more confidence in initiating an interest rate cut.
For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.
This post was written by Melanie Riehl
Video Transcript
The dow hitting a fresh record close while the S and P 500 ends the day just below a record finish more on the trading day takeaways.
Let’s get to Yahoo Finance’s very own, Josh Shaffer, Josh.
Hey Josh.
Yeah, we’ve been following the broadening of this stock market rally over the last couple of days and we got some more signs of it today specifically with the Russell 2000 and sort of the sector action.
So I’m gonna start with the sector action that we had today.
You’ll see in front there, you had energy and financials and industrials leading notably perhaps you have tech coming just in shy of the S and P 500.
You also have communication services, not really on the front end of this.
And this has been the trend really for the last five days now since we had that inflation report that came in better than expected and the market started to price in a September rate cut.
This has been the trend.
It has been a broadening of the rally look at real estate and interest rate sensitive sector leading the S and P 500 sectors.
Of course, when you zoom out to the year.
That hasn’t been the story, right?
It’s been all mega cap tech and then sort of these others look at real estate.
It’s barely even up on the year.
So you’ve seen kind of this shift into this rotation.
This is, of course not the first time we’ve talked about broadening of the stock market rally.
We talked about it a little bit back in February March.
We talked about it last December and it hasn’t really stuck.
So kind of the key question I’ve been talking to strategists about today is just, is it gonna stay and what does it sort of take to stay?
I think that’s where we’re at right now.
When you talk to these folks, Josh, what are sort of the, the indicators, the signals they look for about whether you know that rotation actually does stick.
So here’s a big one that Bank of America’s oung Kwong highlighted to me, this is expectations for earnings for mag seven versus the S and P 500.
So mag seven is in purple, S and P five.
The rest of the S and P 504 93 is in white blue.
Notably, here we’ve just been seeing purple going up and we haven’t seen blue go up for a long time.
Right.
Well, this is this quarter you’re supposed to see the 493 come out of their earnings recession and start to post positive earnings growth.
And sort of the key question is gonna be a, do they do this?
Because remember this is just expectations.
This is just what Wall Street expects.
So do we get this?
And then does it continue through the rest of the year is one of the key fundamental questions?
And then of course, there’s the fed rate cut side of this, right.
And do we get the cuts that we’re pricing in?
Do those come?
And if they do come, how many are we getting?
Is it because the economy is doing good or bad?
That’s sort of where the front of the questions are here.
And that relates us to our second topic.
The size companies.
Yes, Russell 2000 hitting its highest level in two years since 2022.
And I’ll just pull up the chart here for us.
But really the, the Russell has kind of been a great parameter for how people are feeling about rate cuts right on days that people are pricing in more cuts, potentially pricing in fed easing.
You’ll see that the Russell does rather well.
So we can get to IWM here which follows the Russell 2000 and it’s up about 7% I think in the last five days.
Yeah, 7% in the last five days.
So this is really rallied compared to the S and P 500.
Is that, is that, do you think that rally in, in, in the small capture?
Josh I…
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