Investors Ditching Safe Havens In Favor Of Small-Cap Stocks

Investors Ditching Safe Havens In Favor Of Small-Cap Stocks

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(Friday Market Open) Equity index futures are pointing to a higher open on Friday morning as Russian President Vladimir Putin said that there was a positive shift in talks with Ukraine despite reports of talks breaking down on Thursday. The news prompted the S&P 500 futures to test the 4,300 resistance level. As always in these situations, watch the first 30 minutes to see if the Market can hold those gains.

While the news story is developing, uncertainty around the market appears to be easing. The Market Volatility Index (VIX) has fallen below the 30 level. Additionally, gold futures were trading 1.5% lower in premarket action, suggesting some investors are leaving safe havens. Investors may be in search of riskier assets because the Russell 2000 futures were up 1.42% before the opening bell. Considering these developments in light of the selloff in Treasuries the last three days, investors may be in a buying mood going into the weekend.

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Investors appear to be ignoring a negative report on the U.S. economy. Goldman Sachs

GS +0.47%

(Get Free Alerts for GS) downgraded its forecast for the U.S. economy and increased the likelihood of recession. Analysts are projecting the economy to grow at 1.75%, which is below the consensus estimate of 2.75%. The reported sited rising commodity prices, falling consumer spending, and tightening financial conditions that may restrict business access to capital.

While investors may be looking for potential buys on Friday, one stock that they don’t appear to favor this morning is Rivian Automotive

RIVN -3.63%

(Get Free Alerts for RIVN) . The company was down more than 8% in premarket trading after missing on top and bottom line earnings. The company hasn’t been able to ramp up production as it hoped. RIVN projected 25,000 vehicles made this year, but Wall Street was hoping for a number closer to 40,000.

DocuSign

DOCU -21.33%

was also falling dramatically ahead of the opening bell, tumbling 15.85% after missing on revenue despite meeting earnings estimates. DOCU also provided disappointing guidance for its next quarter due to fewer returning customers as the waning pandemic allows contracting parties to meet in person. The company has lost all of its pandemic gains at this point.

Investors appear to be more interested in stocks like Sanderson Farms

SAFM +0.08%

, which was up about 1.2% in premarket trading. SAFM reported a beat on earnings and revenue estimates.

Ulta Beauty

ULTA +0.97%

also beat on earnings estimates and rallied 2.54% in premarket trading. The company also increased its full year earnings outlook. Reviewing the Market Minutes Stocks traded lower on Thursday as investors appeared uncertain on what to do next. The S&P 500 (SPX) did not break resistance at 4,300, failing to follow through on Wednesday’s rally and closing 0.55% lower. The Dow Jones Industrial Average ($DJI) and the Nasdaq Composite ($COMP) also fell 0.34% and 0.95% respectively. Small-cap stocks appeared to outperform large-cap stocks because the Russell 2000 (RUT) was down just 0.23%.The 10-year Treasury yield (TNX) shot higher once again as the Consumer Price Index (CPI) was reported. The TNX is now back above 2%. The 2-year Treasury yield has also touched 1.7%. Despite the rise in these yields, the CME FedWatch Tool only appears to be certain about rate hikes next week and another in May. After that, the market appears less sure despite inflation hitting a fresh 40-year high.The CPI report measured a 0.8% increase month over month and a 7.9% increase year over year, which means inflation grew as expected. However, these are still very high numbers not seen since the early 1980s. Core inflation that excludes food and energy was up 6.4% year over year, which was higher than the forecasted 5.9%. Equity index futures rallied on the report but gave back the gains soon after. All in all, there isn’t much here that is likely to push the Fed off the course that Chairman Jerome Powell described to Congress last week. CHART OF THE DAY: SEEING VALUE. The S&P 500 Pure Value Index ($SP500PV—candlesticks) has risen 8.82% in the last six months. The S&P 500 Pure […]

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