Stocks rebounded on Tuesday after a broad selloff on Monday. While the move isn’t necessarily surprising, it was a far cry from a powerful buy-the-dip move by investors that had characterized the equities rally from last September through mid-February.
The Dow Jones Industrial Average gained 65 points to 12,267, the Nasdaq rose 10 points to 2745 and the S&P 500 gained 7 points to 1313.
That underperformance by tech stocks is the first clue that the party atmosphere just ain’t what it used to be. Considering that large-cap tech stocks had a huge hand in leading the market higher last fall, we’ve come to a place where in the past three months, the Nasdaq 100, as measured by the PowerShares QQQ Trust (NASDAQ:QQQ) exchange-traded fund is down nearly 2%, while the S&P 500 has gained 1%.
(A possible bright spot — two of them, in fact — were upside surprise earnings reports from both Intel (NASDAQ:INTC) and IBM (NYSE:IBM) late Tuesday, which could put some fuel behind a more optimistic mood on Wednesday).
Next, look at small-cap stocks, which took no part in Tuesday’s bounceback – the Russell 2000 Index was essentially flat, rising less than a half-point. Over the past six months, the iShares Russell 2000 (NYSE:IWM) has gained about 16%, compared to the S&P 500’s 10%.
But cutting that timeframe in half to the past three months, the IWM is up just 2%, one percentage point above the S&P 500’s 1% rise.
A good part of the runup in small stocks has been helped by oil prices, which have jumped since last fall, along with the broader market, as investors searched for 20%-50% gains in any stock tied to the energy sector.
While crude is still at elevated levels (relative to six months ago), it is also flat this month, suggesting to investors that the upside in energy plays is spent for now.
Third, a theme that we continually hit in this space: the underperformance of financial stocks, which continued again Tuesday, with the SPDR Financial Select Sector (NYSE:XLF) ETF gaining a grand 5 cents to $15.97, continuing to hover around the 2011 flatline.
Finally, the rally in the 10-year Treasury note that has dropped its yield to its lowest level in a month (3.36%) doesn’t inspire confidence that investors are expecting a better return by stocks anytime soon. It’s difficult to argue that point with the S&P 500 up only 2.4% in the past three months.
