Small Caps Underperform In October & Materials Crater On Tuesday

Small Caps Continue Downtrend - Flat Market

The S&P 500 fell 0.14% which puts it in a 4-day losing streak. There’s not much to make of this losing streak. The S&P 500 is near its record high.

In fact, its outperformance of small caps is more notable than this mini losing streak. The Russell 2000 was down 0.47% on Tuesday. It’s down 6.8% from its record high on August 31st.

The chart below shows the S&P 1500’s performance in October by decile. As you can see, the largest decile is up 8 basis points. The smallest decile is down 3.74%.

S&P 1500 is down 1.38% this month, but the average stock is down 2.75%. There are 106 stocks down 10% or more, but only 15 stocks up 10% or more.

Median stock in the S&P 500 is 10% off its 52 week high. However, the median stock in the S&P 600 is 17% off its 52 week high. Any way you slice the data, small caps have been doing poorly lately. Rising interest rates don’t help the heavily indebted small firms.

(Click on image to enlarge)

Small Caps - Sector Moves

The best sectors on Tuesday were energy and utilities as they went up 0.99% and 0.42%. The most curious part of this move in rates is the action in utilities.

S&P utilities sector increased 5.3% from September 26th. That’s directly the opposite of what you’d expect based on the recent move in yields (besides Tuesday). I’m usually on the side of the bond market, but this time I believe stocks.

The two worst sectors were the materials and industrials which fell 3.4% and 1.51%.

Small Caps - PPG Crashes Then Rebounds

The worst performer in the materials sector and the S&P 500 was PPG as it fell 10.06%. Its stock bounced back after hours. This was because activist investor, Nelson Peltz, reported a stake in the company.

It increased by 4.91% as of 6:15 PM. This stock is supposed to be an indicator of global economic growth. The stock fell during normal trading hours because of bad guidance on Monday evening.

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