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While still higher versus yesterday’s close, US futures have given up some of those gains as the continued decline in long-term treasury yields picks up the pace. The yield on the 10-year US Treasury currently trades below 1.31% which is now lower than at any other point since 2/19. Lower interest rates are good for equity prices, but when the pace of the downside move picks up steam, equity investors take pause.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, a discussion of growth in the Delta variant, economic data from around the world, the latest US and international COVID trends including our vaccination trackers, and much more.
With the Russell 2000 down more than 1% over each of the last two trading days, small caps have really been lagging their large-cap peers. That underperformance continues a trend we have seen over the last several weeks where the S&P 500 has been increasingly outperforming the Russell 2000 on a daily basis. Over the last 50 trading days, the S&P 500 has outperformed the Russell 2000 56% of the time. That matches a number of other periods as the highest frequency of outperformance over a 50-trading day period since late March 2020. What makes the current period different, though, is that if the S&P 500 outperforms the Russell 2000 on any of the next three trading days, the current period will move into the lead as the highest consistency of large-cap outperformance since the end of March 2020. Just as large-cap tech was in the penalty box from early March through the end of Q1, now it appears as though small caps have found themselves in their own timeout.