Small-cap benchmark ends at highest since 2021
The Russell 2000 outperformed on Wednesday, hitting its highest closing level in nearly three years.
The small-cap benchmark rose 1.64%, marking its fourth consecutive winning session and its highest close since November 2021.
These small businesses are expected to perform well as the Federal Reserve lowers interest rates. These cyclical companies tend to rely on financing, and lower interest rates would reduce borrowing costs.
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Russell 2000 for the past 5 business days
“Recently improved growth prospects, supported by better labor market conditions than concerns, and increased expectations for Fed interest rate cuts have pushed prices out of the lower end of the (Russell 2000) upward channel,” said LPL Financial’s technical director. I rebelled,” he said. Strategist Adam Turnquist said in a note:
He said the rally among bank names has also boosted small-cap benchmarks, making them the largest sector by weight in the Russell 2000.
–Dara Mercado, Chris Hayes
Sluggish back-to-school spending may be a red flag for the year-end sales season
Barclays says it makes sense to be cautious if back-to-school spending is going to set the tone for the holiday season. In its latest survey of U.S. consumers, the company pointed to deep discounts and deep disparities between households earning less than $100,000 and wealthier households. The company said spending remains healthy but demand is volatile.
Low-income consumers remain under pressure as wages have not kept pace with inflation, the company said. High-income households, on the other hand, may be feeling a “wealth effect” from rising investment portfolios and rising house prices.
“We expect retailers that can clean inventory and maintain store traffic to do well, while those that can’t do well, we expect to see negative results for those that can’t,” Hale Holden said in a research note. “In many ways, this feels like a return to the base trend of 2018 or 2019.”
Adrian Yee, a retail analyst at Barclays, named Foot Locker, VF Corp and Victoria’s Secret as three stocks that could benefit from a recovery in margins late in the cycle over the next two to four quarters. All three stocks have significantly underperformed the market, with Foot Locker stock plummeting 20% since the beginning of the year.
Victoria’s Secret stock rose 6.6% on Wednesday following the return of its iconic fashion show.
—Christina Cheddar Burke
Stock prices move significantly after hours
Check out the companies making headlines for extended deals.
Discover Financial — Shares fell by 1%. The financial services company’s third-quarter results beat expectations, with earnings per share of $3.69 on revenue of $4.45 billion. Analyst estimates compiled by LSEG were for earnings of $3.42 per share and revenue of $4.35 billion.
CSX — The rail transportation company fell 4% after its third-quarter results fell short of Wall Street expectations. CSX reported earnings of 46 cents per share and revenue of $3.62 billion, compared to analyst estimates compiled by LSEG of earnings of 48 cents per share and revenue of $3.67 billion. Overall sales volume increased 3% year over year, but revenue per unit decreased approximately 1%.
Lucid Group — The electric car maker fell 10% after announcing a public offering of more than 262 million shares. Lucid also said Ayar Saad Investment Company, an affiliate of the Public Investment Fund, has indicated its intention to purchase more than 374 million shares.
A complete list can be found here.
— Ha-Kyung Kim
Stock futures flat on Wednesday
U.S. stock futures opened little changed on Wednesday.
Dow Jones Industrial Average futures fell slightly. S&P 500 futures and Nasdaq 100 futures fell 0.05% and 0.08%, respectively.
— Ha-Kyung Kim
