From the Trading Desk

Small Cap Stocks Lead Rebound

Small cap stocks roared to life as biotechnology stocks rebound after Trump’s meeting with industry leaders. Volume jumped as end of the month rebalancing volume poured end as managers were try to rebalance their portfolios. Things did not look promising heading into the lunch hour as sellers appeared to have the upper hand. The NASDAQ ended up plowing through yesterday’s low and appeared as if we were going to head much lower. No sooner did the market look like it was about to fall apart we saw prices stabilize. Just after 2pm we did see buyers jump back into the market and small caps push higher. We were witness to a solid day of recovery for majority of the stock market even with the Dow lagging behind.

The two biggest winners of the session were Utilities and Healthcare. Utilities have been quiet for about a month and now are challenging its 200 day moving average. XLU could possibly be signaling the market does not believe the Fed may be raising rates any time soon. Healthcare got its boost from pharma and biotechs. However, Healthcare and Equipment stocks still were able to climb 119 basis points on the session. Trumps meeting with industry leaders must have eased some fears. The group certainly looks a lot better and we see some upside with LABU.

On the downside Industrials lagged significantly. Transportation stocks hit the S&P and Dow hard. UPS was the biggest loser after posting disappointing earnings. The stock finished the day down nearly 7%. A huge loss on the day and it weighed heavily on all transportation stocks. FDX was down more than 2% in sympathy with its industry competitor.

Now with January behind us we look forward to a very fruitful February. We can only take what the market gives us. Therefore, we will continue to cut our losses short and be on the hunt for new signals.

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