Broader market spreads its wings
Main U.S. equity index futures green: Nasdaq 100 up ~0.9%
Initial jobless claims 241k vs 260k est
Sep Retail Sales MM > est; Ex-Autos > est
Euro STOXX 600 index up ~0.8%; ECB cuts rates 25 bps
Dollar, gold, crude gain; bitcoin declines
U.S. 10-Year Treasury yield rises to ~4.07%
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BROADER MARKET SPREADS ITS WINGS
Now that the Fed has embarked on what is expected to be a protracted rate-cutting cycle, traders can't help but notice some pronounced relative strength shifts that have come barreling down the track.
Through Wednesday's close the benchmark S&P 500 index .SPX has gained more than 22% so far this year, while the NYSE FANG index .NYFANG, which includes all of the Magnificent Seven stocks, has advanced about 34%.
Against this, the equal-weighted S&P 500 index .SPXEW is about 15% higher, while the small-cap Russell 2000 .RUT is up 13%.
YTD gains not withstanding, more recent action is bearing out a broadening.
On July 10, the SPXEW/SPX ratio fell to 1.1888, which was essentially equal to its 1.189 November 2008 low:
Since the July ratio trough, the broader market has stepped up, while their larger-cap brethren and tech titans are the ones lagging.
Indeed, since July 10, the SPXEW has advanced about 10%, while the RUT has gained more than 11%. The SPX is higher by about 4%, while NYFANG is actually negative by about 5%.
With this, the SPXEW/SPX ratio has rallied to 1.26 and now faces an important hurdle in the form of its descending 200-day moving average (DMA), which is now just over 1.27.
The ratio has been below its 200-DMA since March 10, 2023, or 403 straight trading days. If the ratio can reclaim this long-term moving average, and in such a way that the moving average's slope inflects to positive, it may signal a more protracted period in which the equal-weighted S&P 500 index outperforms the cap-weighted version.
(Terence Gabriel)
*****
FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:
BIG OIL CASH RETURN RESILIENCE IN SPOTLIGHT FOR 2025 - BOFA - CLICK HERE
ROCHE AND NOVARTIS TOPPLE NESTLE IN TIGHT RACE - CLICK HERE
SOVEREIGN DEBT DEFAULT LIST HAS SHRUNK THIS YEAR - TELLIMER - CLICK HERE
EARNINGS LIFT THE STOXX, BANKS BUOYANT - CLICK HERE
EUROPE BEFORE THE BELL: TSMC BOOST, NESTLE MISS - CLICK HERE
ECB TO CUT, MARKETS WANT CLUES ON NEXT MOVE CLICK HERE
SPXEWSPXratio10172024 https://tmsnrt.rs/3UAJ7yf
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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