GE Aerospace, Boeing and homebuilders are moving in today's stock market. Small caps are resuming their rally, too.
The Russel 2000 was up 1.4% in late trading Tuesday and is nearing new highs as it rebounds from a three-day losing streak.
In preliminary numbers, the small-cap benchmark had outperformed the S&P 500 by 10.8 percentage points over the last 10 sessions. That's the largest 10-day performance gap between the two indexes in history, according to Dow Jones Market Data. The Russell rose 10.7% while the S&P fell 0.1%.
Defense Stocks Turn Bullish
Updated 2:35 p.m. ET
GE rallied on a bullish second-quarter earnings report and a raised outlook. The stock broke out of a flat base, and helped iShares U.S. Aerospace & Defense ETF break out as well.
The ETF topped the 137.49 buy point of its own flat base in heavy volume. With nearly 19% of the ETF's weighting, GE certainly provided the main boost. But that isn't the only reason. Boeing and RTX, each representing more than 10% of the index, rose 3.4% and 1.2%, respectively.
Lockheed Martin, which also reported earnings today, shot up 4.4% to a 15-month high. Howmet Aerospace broke out above a trendline around 81.50.
Winners And Losers Of Trump Trade
Updated 12:50 a.m. ET
New research gives some insights into the so-called Trump trade if former President Donald Trump wins again in November. Nicholas Colas, co-founder of DataTrek Research, took a look at sector performance after Trump won the 2016 election and during his term, excluding the Covid-impacted 2020. Some of the findings:
The Russell 2000 jumped 13.6% from election day to the end of 2016, well ahead of the S&P 500, equal-weight S&P 500 and Nasdaq. Chinese stocks fell 8.1%. Financials, energy, industrials and materials also performed well on views about infrastructure spending and potential deregulation.
"Hopes for deregulation, which would help smaller businesses with limited legal resources, seems to have been the cause of this move," Colas wrote. "Given former President Trump's views of U.S.-China trade and geopolitical ties, the sudden downdraft in Chinese stocks in the weeks after the 2016 election makes complete sense."
From election day to the end of 2019, technology, consumer discretionary and financials outperformed, which Colas says is consistent with a midcycle market. Those sectors climbed 93.4%, 59.1% and 54%, respectively.
Biotechs Earn Bullish 'Blue Dot'
No industry group has more stocks with blue dots on their MarketSurge charts than biotechs. The blue dot marks stocks near breakouts whose relative strength lines are making new highs. That's a bullish combination.
Sure, there are more than 700 companies in the biotech group, so it's not hard to find one in many screens. But have a look at Summit Therapeutics and Edgewise Therapeutics, which are near buy points. Like most biotechs, neither company is profitable.
Housing Market Doing Great — Or Not
The median home price rose 4.1% in June from the year-ago period to $426,900. That's the second straight month of record home prices, says the National Association of Realtors. At the same time, June existing-home sales fell 5.4% from May and from a year ago.
What does it mean? NAR Chief Economist Lawrence Yun says it's becoming more of a buyer's market.
"Homes are sitting on the market a bit longer, and sellers are receiving fewer offers," Yun said in the report. "More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis."
Total housing inventory at the end of June was 1.32 million units, up 3.1% from May and 23.4% year over year. Unsold inventory is at a 4.1-month supply at the current pace of sales. That's up from 3.7 months in May and 3.1 months in June 2023.
SPDR S&P Homebuilders rose 0.3% and the ETF is in a buy zone from a 110.09 buy point. IBD's homebuilders industry group is No. 63 out of 197 groups, vs. No. 121 four weeks ago.
Big Picture: VIX May Signal A Low
The Cboe Market Volatility Index, or VIX, jumped more than 20% above its 10-day moving average Friday. Such sudden spikes in volatility often signal index lows. As The Big Picture notes, this is a secondary market signal, and IBD is keeping its recommended exposure at 60%-80%.
