To say it has been a tough couple of days for anyone connected to Boeing (BA) would be an understatement.  In terms of the company’s stock, the last two days have seen the first back to back declines of 5%+ in close to a decade (June 2009).  As a result of this week’s decline, BA has lost its perch at the top of the DJIA in terms of best performers YTD, now coming in at number six.  That being said, the stock is still up over 17% on the year, and because of the DJIA’s unique way of weighting components by their share price rather than market cap, BA has still been the largest contributor to the DJIA’s YTD gains. Even more amazing? It’s still not even close.

The chart below shows the YTD attribution of each of the DJIA’s 30 components to the index’s total gain YTD.  Accounting for still more than 15% of the DJIA’s YTD gain, BA has had nearly twice the YTD impact on the DJIA so far this year as the next closest stock (Goldman Sachs – +8.7%).  The fact that BA still has had such an outsized impact on the DJIA even after its big decline this week shows not only how extreme its move higher to kick off the year was, but also how odd it is to weight a stock index by an arbitrary measure like each component’s share price.  One final note — it was somewhat ironic to see that the one stock that has had the most negative impact on the DJIA YTD is also the index’s newest component: Walgreen’s Boots Alliance (WBA) added last June.

Coming off of declines last week, equities have performed much better in the first half of this week.  Currently, half of the major index ETFs have erased last week’s losses and moved back into overbought territory.  Meanwhile, the other half which is predominantly small and mid-caps, in addition to the Dow thanks to Boeing, are still in the red.  This half remains in neutral territory whereas most had been overbought this time last week.  Despite some of these ETFs having managed to recoup losses from the past week, small and mid-caps still have a little ways to go until they do the same.  Each of these are still down over 1% with the Core S&P Small Cap (IJR) down the most at 1.69%.  Even with this recent pullback, small and mid-caps remain some of the best performing indices so far in 2019.

Taking a look by sector, it is just about the same story.  Of the eleven sectors, six are now overbought while the remaining five are neutral.  In the same way that those with a loss over the past week are still neutral, the others that have edged out gains have pushed deeper into overbought territory.  As we mentioned in last night’s Closer, the Utilities sector is of particular interest.  The sector’s Water, Multi, and Electric industries are the closest to their respective 52-week highs.  Utilities is currently the most overbought approaching extreme levels (2 standard deviations or more above the 50-DMA).  Over the past week it has gained the most at 2.1%, while on a YTD basis, the sector’s gains have been more middling.  Conversely,  the weakness in the Health Care sector ETF should be addressed as it is up only 5.28%; far worse than its peers.

After the steepest five month decline since the Financial Crisis and the longest monthly losing streak since 1998, NFIB Small Business Confidence rebounded in February, although by a less than anticipated degree.  While economists were expecting the headline index to bounce from 101.2 up to 102.5, the actual increase was much smaller at just 101.7. As shown in the chart below, while the index was higher this month, it hasn’t put anything more than a small dent into the decline we saw from the high back in August of last year.

From a longer term perspective, the recent decline from the August 2018 high is definitely severe relative to prior declines.  What we noted following last month’s report and is worth reiterating again is that prior periods where we have seen a quick and fast drop in small business sentiment haven’t been particularly good at timing downturns in the business cycle.  While recessions typically are accompanied by a sharp downturn in business sentiment, there have also been plenty of other periods (1984, 1993, and 2005) where we saw sharp declines in small business sentiment but were nowhere near the onset of a recession.

Finally, when it comes to issues facing small businesses, finding qualified employees continues to be the biggest problem they face, and there are some signs that they are starting to pay up in order to find those with the right qualifications.  In this month’s survey, the percentage of businesses citing Labor Costs as the biggest problem increased from 8% to 10%.