The technology sector started this week with strong trading volume on higher relative volume. This faded by 11 a.m. The index, along with the Dow Jones and S&P 500 (IVV), ended Monday slightly higher. The Russell 2000 (IWM), however, was the out-performing index.
Investors believe the rally in the mega-cap will spread to small capitalization firms. The biggest holdings in IWM ETF are Insmed (INSM),
FTAI Aviation (FTAI), and Fabrinet (FN). On the index, Abercrombie & Fitch (ANF), a retail firm, and Sprouts Farmers Market (SFM), a supermarket chain, are especially attractive holdings.
Stock markets are starting to price in the outcome of the U.S. elections. A republican win would hurt clean energy stocks, although the reaction is mixed. For example, Array Technology (ARRY) will try to rebound from Monday’s losses while Clean Energy Fuels (CLNE) gained almost 3% on the day.
Despite the market rally fading on Monday, the market sentiment is overwhelmingly positive. Sentiment is bullish, thanks to expectations that the U.S. Federal Reserve will cut interest rates in September. The drop in U.S. bond yields suggests that the market already priced in the widely broadcast rate cut. Still, mortgage rates must fall to stimulate housing sales volumes. Until then, despite the recent rally, Lennar (LEN) and D.R. Horton (DHI) are not stocks to buy.
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