Stocks ran up in a big way Monday, continuing a pattern that for most concerned is a bit disturbing. Small-cap stocks are lagging the indices, and while money continues to flow toward the Nasdaq and S&P 500 names, it is a cautionary tale of success.
Fresh, new all-time highs were hit again on Monday by those two indices, yet the Russell 2000 (IWM) is woefully trailing the action, actually posting a negative return in 2024. That is highly unusual and often unsustainable versus large caps. In other words, the small-cap stocks had better catch up or the weight of the 2000 stocks will pull down the rest of the market (as we saw happen in 2022).
Volume trends are improving but breadth is not, and that could be a big problem soon unless the up/down ratio is rehabilitated. Breadth is what drives markets higher, more new highs than new lows, more volume to the up issues. Small caps continue to thirst for volume.
Retail sales out this morning showed a miss versus expectations. Sales were up only .1%, below the Dow Jones estimate, April's report was revised downward. The core reading, which excludes autos, was -.1%, also missing the mark. Increases in sporting goods,, music and book stores along with online outlets were higher along with grocery, while bars and restaurants were lower. This is just one more data point showing a modest slowdown from the consumer and perhaps pushing the Fed to re-stimulate via rate cuts (down the road).
Lennar earnings were out on Monday evening and, while we do not own homebuilders (competitor DR Horton is in the bullpen), the company missed and guided earnings lower. However, deliveries were strong, but their outlook on this metric was not raised. The deliveries, though, are good news for portfolio holdings (BLDR) , (VMC) , (URI) and (WM) .
We have a rare midweek holiday on Wednesday. Markets will be closed in observance of Juneteenth. Today is the first day of trading for July VIX futures, which is a day we often see movement. Further, Friday sets up as a potentially explosive session with a heavy options expiration day.
At the time of publication, TheStreet Pro Portfolio was long BLDR, VMC, URI and WM