Stocks rallied quite strongly through early afternoon but lost a lot of momentum as the day went on. Volume continues to be anemic ahead of the Labor Day holiday, and the bounces from oversold conditions are not emphatic. The S&P 500 gained 0.2% while the NASDAQ continues to be the relative star in this correction, up 0.75%. The major economic news report of the day was that the 2nd revision of Q2 GDP was up substantially. It really doesn't make much sense to release GDP so quickly after a quarter ends if they are going to revise it so substantially but that is government for you.
The nation's second-quarter gross domestic product -- the broadest measure of economic activity -- grew at a 2.5% annualized pace, according to a revised estimate from the Bureau of Economic Analysis. That's up from a previous estimate of 1.7% and better than what economists were expecting. Rising exports, consumer spending and real estate spending helped boost the second quarter numbers. A decline in government spending acted as a drag.
Not much is changing here - there are small niches where the action remains hot and heavy, including the four horsemen we mentioned yesterday, along with other niche type plays mostly in the tech space. But most indexes outside of NASDAQ continue to struggle as do broad sectors. This needs to change - without broad participation a small select group of stocks acting well doesn't do much for the rest of the market.
We'll add the small cap focused Russell 2000 to the index charts tonight - you can see it is better than the S&P 500 but worse than the NASDAQ - but in the same flag pattern.
There are a few mid sized companies doing well - one common theme is anything showing good growth metrics on the mobile internet (i.e. smartphones). Yelp and Zillow are two examples.
But again we are missing entire sectors - see healthcare and regional banks and consumer discretionary, charts we mentioned early this week had fallen out of the bottom of their flag formations. This two day rally has only pushed them back to the bottom of those flags.