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“Reading the record, it is striking how many calamities that I anticipated did not in fact materialise.” – George Soros
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After a quiet day yesterday, futures aren’t doing much this morning either as investors await the release of July CPI. European markets started the day higher but have been selling off throughout the day (sound familiar?), and Asia had a mixed session, although Japan rallied more than 2% after being closed for trading on Monday. While Japanese stocks traded higher, there was literally no trading in Japan’s 10-year JGBs. That was the first time that had happened since March 2023.
July CPI came in right in line with expectations as the headline reading increased 0.2% and core rose 0.3%. On a y/y basis, headline CPI was a tenth weaker than expected at 2.7% while the core reading was a tenth higher than expected (3.1%). The initial reaction to the move was slightly lower yields and higher stock prices.
It’s hard to read too much into market activity on a quiet day in August, but the trend of intraday weakness continued to start the week as the S&P 500, as measured by SPY, closed lower than it opened for the tenth time in the last fifteen trading days. When the bell finally rang, the S&P 500 finished down 0.25%, the Dow was down 0.45%, while the Nasdaq fell 0.30%. Besides those major large-cap indices, mid-caps slumped 0.42% while small caps held up relatively well with a decline of 0.09%. The only small ray of sunshine yesterday was in the Russell Microcap Index, which finished the day 0.17% higher. When we say small, we mean it, though. The combined market cap of the companies in the index is just $426 billion, which is smaller than Netflix (NFLX), and the average market cap of companies in the index is under $400 million, with an M!
Looking at the performance of micro-caps, as measured by the iShares Microcap ETF (IWC), after testing the Q4 highs in late July, they pulled back to the 50-day moving average, where they bounced to kick off August. It’s still early, but if the bounce holds, the index could be rounding out the right side of a cup and handle formation.
