Mag7 leads the indices higher Friday but lagging small and micro stocks hint of nervousness ahead of August nonfarm

The indices all ended up on Friday driven by the Mag7. There was a fair amount of volatility on the day with the Dow peak to trough swing of 400 points or 1%, but ended the day at the high point. Volumes were a a lot better considering we are still in 'holiday' season. The VIX fell slightly to 15 - it hit 65 intraday on 5 August, its highest level since Covid in 2020.

DJIA +0.55%, S&P 500 +1.01% and Nasdaq +1.13%. On an equal weighted basis (our measure) the overall market was up +0.37%, all market cap bands were up. Breadth was a respectable 61% (vs 12% on 5 August and a high of the mid 80s% at the end of July) and daily volumes of 8.8b (vs the average daily volume over the last year of 7.9b).

One day returns as follows - equal weight basis: Mag7 +1.6% (TSLA +3.8%, AMZN +3.7%, NVDA +1.5%), large +0.76%, medium +0.54%, small +0.47% and micro +0.14%. On a 1 and 2 week equal weight basis; Mag7 -1.6% and -0.6%, Large caps +0.4% and +2.4%, Medium cap flat and +2.8%, small cap -0.3% and +3.0% and finally Micro cap -1.1% and +2.7%.

On a weekly basis the market was flipping between favouring large caps to back to small/micro the following week. Our risk monitor remains in favour of the larger cap stocks and this performance differential (favouring large over small/micro) was magnified after the poor nonfarm payroll July figures and the associated wider Market retreat. Much of the adverse differential reversed in the middle of August but as we approach the release of August nonfarm the small and micro cap stocks (higher perceived risk) have started to lag again.