After two months of some of the largest gains to small business confidence on record, NFIB’s Small Business Optimism index pulled back slightly in July. The index fell 1.8 points to 98.8 which was also below expectations of a reading of 100.5. While lower sequentially and still well off the highs from prior to the pandemic, July’s level of 98.8 was less than half a point from the historic average for small business optimism of 98.4.

Overall, breadth was very mixed in the July report.  Of the ten components of the headline index, four fell, one was unchanged and the other five rose.  As the pandemic drags on, the most glaring decline weighing on the headline number was for expectations of improvements in the economy.  Fewer companies reported now as a good time to expand (that index fell to 11 from 13 in June) and a net percentage of 25% expect the economy to improve compared to 39% in June.  The 14 point decline is tied with an identical decline in August of 2011 for the seventh-largest MoM decline on record for that index, but it only leaves that component in the 81st percentile of all readings. In other words, small businesses are less optimistic for the future than they were in June, but on net are still expecting the economy to improve.  That can be seen through hiring plans as a higher share plan to increase employment and increase capital expenditures with those indices rising 2 points and 4 points, respectively. On the other hand, fewer businesses plan to increase inventories as those expecting higher sales remains muted albeit improving. That can also be seen through the 3 point rise in the index for actual earnings changes. Fewer businesses were also reporting weak sales as the most pressing issue for business.

Additionally, although they are not inputs to the headline index, a record low of 26 percent reported borrowing on a regular basis, though, the cause of that does not appear to be due to credit availability. The index for credit availability was slightly higher in July and remains in the top 5% of all readings. The most important issues echo this as only 1% reported financials and interest rates to be the biggest issue; unchanged from last month.  The biggest issue for businesses remains the quality of labor. That index rose from 19 in June to 21 in July.  Click here to view Bespoke’s premium membership options for our best research available.

For most of us, Monday is the worst day of the week, but for the Nasdaq lately, it doesn’t get any better than Monday.  The chart below shows the Nasdaq’s performance on Mondays since the closing low for the S&P 500 on 3/23.  On that day, the Nasdaq fell a pedestrian 0.3%.  Since then, Mondays have been a blockbuster.  In the 19 weeks between 3/23 and today, the Nasdaq’s average gain on Mondays (or Tuesday if Monday was a holiday) has been +1.4% with only two declines.  Not only that, but on 13 of those Mondays, the Nasdaq has been up over 1%, including eight of the last nine heading into this week.  On a cumulative basis, half of the Nasdaq’s entire gain off of the March 23rd lows was from Mondays alone.  With the Nasdaq down half of a percent so far today, the magnitude of the decline isn’t all that notable but relative to other Mondays recently, it stands out like a sore thumb.  Click here to view Bespoke’s premium membership options for our best research available.

Over the last few days, we’ve been seeing a moderate rotation in the market as red-hot growth stocks sell-off and investors shift into other areas of the market that have been lagging.  To highlight this, the table below highlights 24 companies in the Russell 3,000 with market caps of more than $1 billion that traded at a 52-week high within the last month but are currently down more than 20% from that high. The vast majority of these stocks are names that investors haven’t been able to get enough of in 2020 but now appear to have had their fill.

Topping the list of these reversals is Eastman Kodak (KODK).  On 7/29, the stock surged to a 52-week high of $60.00 after being awarded a questionable government contract to domestically produce components for prescription drugs.  With the SEC and government agency that originally awarded the contract now looking into stock option awards at the company just before it was announced, the stock has pulled back sharply and is now down over 80% from its high less than two weeks ago.

While KODK is more of a unique example, other names on the list are primarily growth or health care stocks that have benefited from the COVID outbreak. However, now that signs suggest the summer wave in the south has crested, investors appear to be taking some profits.  Shares of Vaxart (VXRT) hit a high of $17.49 on July 14th but have since lost nearly half of their value and trade back in the single-digits.  Additionally, Bloom Energy (BE), 1Life Healthcare (ONEM), and Bioxcel Therapeutics (BTAI) have all lost more than a third of their value.

In terms of market cap, most of the names listed are on the small side, but Tesla (TSLA) is a notable exception as it is now just over 20% below its 52-week high on 7/13.  Other relatively large companies on the list include Moderna (MRNA), Citrix Systems (CTXS), Teladoc (TDOC), and Livongo (LVGO).  TDOC and LVGO both hit all-time highs last week but after announcing a mostly stock merger last Wednesday, both have lost nearly a quarter of their value.

While all of the stocks listed below have seen sharp pullbacks in the last several days, a little perspective is in order.  Of the 24 names listed, the average YTD change even after the declines has been a gain of 219.7% (median: +94.6%).  Only two of the stocks shown (New Relic- NEWR and Sonos- SONO) are down YTD, and half of them have at least doubled and in many cases much more.  Click here to view Bespoke’s premium membership options for our best research available.