Stock Market Hits New Highs; Trump Plan Puts Fire Under Small Caps – Investor's Business Daily

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Key U.S. stock indexes turned mixed Monday even as small caps and biotechs continued to rally.

XAutoplay: On | OffSPDR Dow Jones Industrial Average (DIA) and SPDR S&P 500 (SPY) rose 0.5% and 0.3% as both indexes hit new highs. But PowerShares QQQ Trust (QQQ) was slightly underwater.

Small caps added to last week’s gains with iShares Core S&P Small-Cap (IJR) up 0.8% to a record best. Also marking a new high was iShares Russell 2000 (IWM), which advanced 0.7%. Both ETFs are near the top of a buy range from their respective flat-base entries.

Among sector funds, telecom, biotech and utilities led the upside in the stock market today. SPDR S&P Biotechnology (XBI) and iShares Nasdaq Biotechnology (IBB) gained about 1% each. XBI is now extended from an 82.48 flat-base buy point; IBB remains in buy range from a 330 flat-base entry. XBI component stock Dynavax Technologies (DVAX), whose Heplisav-B hepatitis B vaccine was approved in July, surged 7%.

Oil, retail and gold lagged as West Texas intermediate crude prices skidded 2% to $50.59 a barrel and gold futures fell 0.6% to $1,277.30 an ounce. United States Oil (USO) slid 2.3%; PowerShares DB Oil (DBO) dropped 1.8%.

SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) gave up about 0.5% each. Both funds have extended a slide that began Sept. 8. They gapped below the 50-day line last week.

Small Caps Get Trump Bump

Small-cap stocks are rallying further as President Trump’s tax-cut proposal is expected to benefit smaller companies the most.

Vanguard Small-Cap Growth (VBK) leapt past a 150.38 flat-base entry Wednesday and remains in buy range. Shares advanced 5% from a prior breakout to the start of the just-cleared pattern.

The fund, which tracks the CRSP US Small Cap Growth Index, has attracted $6.5 billion since its January 2004 launch. Technology represented the biggest chunk of assets as of Aug. 31, with a 24% weighting. Health care made up 16%, real estate 14%, and industrials and consumer cyclicals 13% each.

Its top names included options exchange operator CBOE Holdings (CBOE), software developer Cadence Design Systems (CDNS) and video game maker Take-Two Interactive Software (TTWO). The top 10 holdings made up 6% of assets. The fund has 680 stocks in its portfolio.

VBK has returned 15.3% year-to-date through Sept. 30, according to Morningstar Direct, outpacing the S&P 500’s 13.8% gain. It’s produced average annual returns of 12.8% and 8.4% over the past five and 10 years, respectively. The stock market benchmark index’s gains for those periods are 14.1% and 7.4%. VBK carries a 0.07% expense ratio.


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IShares Russell 2000 (IWM) is also in buy range after a breakout during the past week. The ideal buy point for the flat base it just cleared is 144.35. The fund had formed a series of almost adjacent bases since December. Before that, it advanced 10% after a November breakout from a flat base.

The 17-year-old fund, which tracks the Russell 2000 Index, has amassed $41.3 billion in assets. As of Sept. 27, it counted Kite Pharma (being acquired by Gilead Sciences (GILD)), Bluebird Bio (BLUE) and Exact Sciences (EXAS) among its top holdings. All three belong to the No. 2-ranked biotech industry group.

The biggest sector weightings were financial services at 17.5%, technology at 17%, and industrials and health care at about 14% apiece. With about 2,000 stocks in the portfolio, the top 10 holdings represented 2.6% of assets.

IWM has returned nearly 11% YTD; its average annual returns for the past five and 10 years are 7.9% and 11.4%, respectively. Its expense ratio is 0.20%.

Friday’s picks, PowerShares Buyback Achievers (PKW) and iShares Nasdaq Biotechnology (IBB), both rose Friday and are still in buy range from their respective buy points of 55.02 and 330.

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