Small and mid-size stock indexes hit new highs
Suddenly less confident about the rest of the world, some investors and traders have been turning back to stocks of smaller companies that are mostly dependent on the U.S. economy’s fortunes.
Key indexes of small and mid-size shares rose to fresh 17-month highs Wednesday, a day after fully recovering their losses from the mid-January to early-February market pullback.
Big-stock indexes, by contrast, are still shy of their January highs.
Standard & Poor’s index of 600 small-company stocks has jumped 3% this week. The index now is up 10.5% since Feb. 8, recouping all of its 9.3% drop from Jan. 19 to Feb. 8.
S&P’s index of 400 mid-size stocks also is at a 17-month high, and up 9.5% since Feb. 8.
Meanwhile, the S&P 500 index of the largest U.S. stocks is up a less impressive 5.9% since Feb. 8. It is still down 2.7% from its recent high reached Jan. 19.
Year to date, the S&P 500 is up just 0.3%. The S&P small-stock index, meanwhile, is up 3.7% and the mid-size-stock index is up 4.4%. The broader Russell 2,000 index of smaller stocks is up 3.8% this year.
Satya Pradhuman, whose firm Cirrus Research in Tarrytown, N.Y., focuses on smaller stocks, says small and mid-size U.S. issues are attracting money that has been scared away from foreign stocks and U.S. multinational issues.
Worries about a potential slowdown in China’s economy, and fear of fallout in Europe from the Greek government’s debt woes, have depressed many Asian and European stock markets. And the dollar’s strength against most other currencies has compounded losses for U.S. investors overseas.
Through Friday, the average foreign-stock mutual fund was down 3.9% for the year, compared with a 0.4% loss for the average domestic stock fund, according to Morningstar Inc.
“The ‘global exposure’ theme hasn’t played favorably this year,” Pradhuman said.
Although many smaller firms do some business overseas, many rack up most of their sales in the U.S. -- which is why many investors steer toward those stocks whenever their focus turns to the home front.
“Investors are thinking, ‘The U.S. economy isn’t great, but it’s better than most’ ” at the moment, said Anthony Conroy, head trader at brokerage BNY ConvergEx in New York.
