Major U.S. stock indexes ended mostly flat Monday after large companies gave up early gains, but smaller companies closed broadly higher.
The Standard & Poor’s 500 index slipped a fraction, with losses in technology and healthcare stocks outweighing gains in financials and other sectors. The Russell 2000 index of smaller-company stocks —which has lagged behind the S&P 500 this year — jumped, outpacing the rest of the market.
Investors are taking a shine to smaller-company stocks in hopes that they’ll be better shielded from the fallout of the U.S.-China trade war than large multinationals.
“If you’re making your product or service in the U.S. and selling it to U.S. customers, you’re somewhat more insulated from the global trade volatility and the slower growth that’s spawning from that globally, too,” said Ben Phillips, chief investment officer at EventShares.
The S&P 500 edged down 0.28 of a point, or less than 0.1%, to 2,978.43. The index, which is coming off two up weeks, is within 1.6% of its all-time high set in late July.
The Dow Jones industrial average rose 38.05 points, or 0.1%, to 26,835.51. The Nasdaq fell 15.64 points, or 0.2%, to 8,087.44. The Russell 2000 climbed 19.06 points, or 1.3%, to 1,524.23.
In the last two weeks, the broader market has bounced back from a bout of volatility brought on by the trade war as the United States and China imposed new tariffs on more of each other’s goods. Investors worry the escalation of tariffs may be dampening global economic growth and threatening to nudge the United States into a recession.
Traders are hoping for a deal between the world’s two largest economies and were encouraged last week by news that talks will resume in October.
A mixed bag of economic data has also kept Wall Street focused on central banks and whether they will keep taking measures to shore up economic growth. On Friday, Federal Reserve Chairman Jerome H. Powell said the U.S. central bank doesn’t expect a recession and will take necessary actions to maintain growth.
Economists expect the Fed to cut interest rates when it meets next week. Separately, the European Central Bank is expected to unveil new monetary stimulus measures Thursday to help shore up that region’s economy.
In early trading Monday, U.S. stock indexes appeared set to extend their gains from last week, led by gains in banks and communications companies. But within hours, the momentum faded and the major indexes wobbled between small gains and losses the rest of the day.
The Russell 2000, meanwhile, continued to climb. Its 13% gain year-to-date is still far behind the S&P 500’s 18.8% increase. That’s one reason the smaller-company stocks are looking attractive right now.
“People are rotating out of the more expensive stuff, some of the things that are probably risky in a downturn, like tech, and going into some more traditional value,” Phillips said.
Among the winning small-cap stocks Monday were video-game retailer GameStop, which jumped 10.4%, and prison operator GEO Group, which rose 2.6%.
Payment processors helped weigh down technology sector stocks. Visa slid 2.3%, Mastercard fell 2.8% and PayPal lost 4.2%. Drugmakers led the slide in healthcare stocks. Merck slid 3.6% and Abbott Laboratories fell 2.1%.
Rising bond yields gave banks a boost. Lenders rely on higher yields to set more lucrative interest rates on loans. JPMorgan Chase shares rose 2.5% and Bank of America shares gained 3.3%.
The yield on the 10-year Treasury rose to 1.64% from 1.55%, a sign that investors remain confident that the economy will keep growing. They also shifted money out of safer-play sectors such as utilities and makers of consumer products.
Energy stocks climbed as the price of U.S. crude oil rose 2.4%. Oilfield services company Schlumberger’s stock jumped 5.9%. Halliburton shares rose 4.5%.
Benchmark crude oil rose $1.33 to settle at $57.85 a barrel. Brent crude oil, the international standard, gained $1.05 to close at $62.59 a barrel.
AT&T rose 1.5% after activist investment manager Elliott Management, which has a $3.2 billion stake in the telecom company, sent a letter to AT&T’s board noting that its stock has badly lagged behind the broader market over the past 10 years and urged it to shed businesses and trim costs. AT&T said it will review the proposals.
Freddie Mac and Fannie Mae each soared 42.8% after an appeals court overturned a ruling that supported the government’s practice of collecting most of the profits generated by the mortgage finance giants.
In commodities trading Monday, wholesale gasoline rose 1 cent to $1.58 a gallon. Heating oil climbed 3 cents to $1.93 a gallon. Natural gas rose 9 cents to $2.59 per 1,000 cubic feet.
Gold fell $4 to $1,502.20 an ounce. Silver rose 5 cents to $18.02 an ounce. Copper fell 1 cent to $2.61 a pound.