Shop for Bargains in the Russell 2000

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On Wednesday, stocks closed flat-to-lower following Tuesday’s blast-off. Stocks started strong but lagged in the afternoon when questions rose as to how the president’s new tax plan would pay for its increase in the nation’s debt.

Democrats voiced opposition to the plan as they also voiced opposition to the reductions in business-tax rates. The administration offered little in the way of new information except — bringing back jobs from overseas, making business rates more competitive, simplifying the tax system and relying on an increase in resulting revenues to offset the tax cuts.

A minor reversal occurred as the Dow Jones Industrial Average and the S&P 500 closed down 0.1% after being ahead earlier in the day, while and the Nasdaq ended the day flat. The small-cap Russell 2000 was one of the few indices to hold its gains as it closed higher by 0.6%.

Twitter Inc (NYSE:TWTR) jumped 7.9% on a report of an increase in new monthly active users. Chipotle Mexican Grill, Inc. (NYSE:CMG) rose 2.4% after a solid increase in sales, but PepsiCo, Inc. (NYSE:PEP) foundered, falling 0.7% after reporting a 1% drop in beverage volume in its last quarter.

At the close, the Dow Jones Industrial Average fell 21 points to close at 20,975, the S&P 500 fell a point to 2,387, the Nasdaq lost a fraction at 6,025, but the Russell 2000 rose 8 points to close at 1,419. The NYSE’s primary exchange traded 972 million shares with total volume of over 4 billion shares traded, and the Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 1.4-to-1, and on the Nasdaq, advancers led by 1.6-to-1. Blocks on the NYSE increased to 7,764 from 7,495 on Tuesday.


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Shop for Bargains in the Russell 2000

The small-cap companies will benefit most from President Donald Trump’s tax plan, and the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) confirms that fact by extending its closing high.

Conclusion: As noted, small- and mid-cap stocks should benefit most from the new tax plan. Had I included the SPDR S&P MidCap 400 ETF (NYSEARCA:MDY), even though it did not achieve a new closing high, it did have a modest rise.

Thus, the small-cap and mid-cap area should be the focus of new money purchases. True, we are in a strong long-term bull market that should result in “a rising tide lifts all ships.” However, traders who are seeking faster rewards should be shopping the lists of quality small- and mid-cap lists for bargains. Even though their risk is high their potential return, as a group, more than offsets the risk.

Please see my Trade of the Day as an example of a small-cap, undervalued semi-conductor value.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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Article printed from InvestorPlace Media, https://investorplace.com/2017/04/russell-2000-bargains/.

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