US markets take a pause after a strong recent run for the risk sectors and micro cap

The US Indexes were mixed on Thursday after the September retail sales figures beat expectations with 0.4% vs 0.3% expected. So far in the reporting season the trend has been for upgrades, Netflix beat Q3 expectations this morning. The riskier assets (Biotech, Blockchain, Micro cap, Clean Energy..) paused after four days of outperformance. The VIX was flat at 19. The main indexes were; DJIA +0.37%, S&P 500 -0.02%% and Nasdaq +0.04% (Mag7 flat). On an equal weighted basis (our measure) the overall market was -0.2%. Breadth was weak at 44% (range of 12% to 88% over the last six weeks) volumes were flat at 8.1b (the average daily volume over the last year of 8b). 

One day returns as follows - equal weight basis: Mag7 flat (NVDA +0.9%, GOOGL -1.4%), large cap -0.21%, medium cap -0.16%, small cap -0.22% and micro cap -0.19%. On a 1 and 2 week equal weight basis respectively; Market +3.3% and +3.3%, Mag7 -0.7% and +0.9%, Large caps +1.2% and +1.7%, Medium cap +2.0% and +2.8%, Small cap +4.0% and +4.2% and finally Micro cap +3.7% and +3.2%. 

Our risk monitor remains in favour of the larger cap stock but Small and Micro have now outperformed the market on both a 1w an 2w period. Small and Micro stocks have proved far more volatile than the Large and Medium cap stocks over the last eight weeks. Micro caps have underperformed the market by 18% over the last 12 months.

The sector bias was defensive with only three sectors in positive territory. Banking & Investments and Insurance pushed Financials higher. Gold and Silver stocks both outperformed, pushing Basic Materials into positive territory. Continued strength in Uranium stocks helped Energy beat the wider marker albeit oil stocks were flat. Healthcare was weak yesterday for the first time in five days, it has outperformed the market over the last 2 weeks. This sector has generated negative returns over the last three months but when it runs it runs very aggressively - it was +55% from mid Nov23 to Feb24. Too early to say the is the start of another run but it is worth watching. Utilities was the worst performing sector, pulled down by gas Utilities (the gas price is down c13% over the last couple of weeks). Electric Utilities were soft for the first time in a few days but clean tech beat the wider market. Uranium stocks were strong yesterday +1.9%% although the underlying raw material remains flat - the performance is due to positive new flow around the sector including supply constraints and the recent Google Kairos nuclear announcement. Tech underperformed on Wednesday, Blockchain continues to seesaw and was weak yesterday (-2.9%) after a very strong Wednesday. Semicon beat the market.

A notable number of 52 week highs in virtually all sectors ex Energy: Basic Materials (Gold, Silver, non-paper Packaging), Consumer Cyclicals saw a high number (across the sector ex auto, Hotels & Entertaining and Media have both been strong recently), Financials exceptionally high number (across the sector), Industrials had an exceptional number again (across the sector ex Transport) and Technology (Software & IT Services and Technology Equipment again), Real Estate (Residential & Commercial REITs), Utilities (Electric and IPPs). Just to repeat but most of the sectors and industries mentioned have been strong for a number of days.

Notable high volumes in Basic Materials (Gold, Silver. Iron and Steel), Industrials (across the sector) and Technology (Software & IT Services again)