MARKET SNAP: At 5:55 a.m. ET, S&P 500 futures down 0.4%. 10-Year Treasury yield lower at 2.64%. Nymex down 4 cents at $102.55. Gold 0.3% higher at $1333. In Europe, FTSE 100 down 0.9%, DAX down 1.5% and CAC 40 down 0.9%. In Asia, Nikkei 225 down 0.3% and Hang Seng up 1.7%.
WATCH FOR: Weekly Jobless Claims (8:30 a.m. Eastern Time): seen 335K; previously 336K. January Durable Goods Orders (8:30): seen -2.0%; previously -4.2%. February Kansas City Fed Manufacturing Survey (11:00). AMC Networks, Best Buy, Chiquita Brands, Dynergy, Gap, Hilton, Kohl’s, Lamar Advertising, Leap Wireless, Mentor Graphics, Ross Stores, Salesforce.com, Sotheby’s, Universal Health, Valeant Pharma, Wendy’s and YRC Worldwide are among companies scheduled to report quarterly results.
THE BREAKFAST BRIEFING
Momentum stocks have regained their mojo.
The high-flying stocks that were at the center of frenzied trading in 2013—social media, biotech and Elon Musk-operated companies—have raced higher in recent days as the broad market has stagnated.
Facebook Inc. has risen 27% this year, Netflix Inc. is up 22% and SolarCity Corp. is up 49%. Tesla Motors Inc. has surged 68%, and is set to move even higher after the electric car maker lifted the curtain on its $5 billion “Gigafactory.” Mr. Musk is CEO of Tesla and chairman of SolarCity.
In the Russell 2000 index of small-capitalization stocks, 11 of the top 14 performers are biotech stocks. The three biggest biotech gainers have all more than doubled, with top performer Intercept Pharmaceuticals Inc. up a whopping 495%.
Momentum stocks were a key part of the broad market’s record-breaking rally last year, as a rising tide across all sectors lifted the S&P 500 to a 30% gain. But investors have been more discerning in 2014 due to rising valuations and less stimulus from the Federal Reserve. Those factors have made it tougher for stocks to rise in unison, while simultaneously providing stock pickers with additional opportunities to succeed.
Many momentum stocks have overcome a tough start to the year and have thrived recently on higher-than-usual trading activity.
The iShares MSCI USA Momentum Factor ETF (ticker symbol MTUM), which invests in mid-cap and large-cap momentum stocks, registered inflows Wednesday on more than 10 times the average daily volume, according to data compiled by WallachBeth Capital. Facebook, Google Inc. and Amazon.com Inc. are among the ETF’s top holdings.
MTUM is up 3.5% this year, compared to the S&P 500’s 0.2% drop.
The S&P 500 has failed for three straight days to set a fresh record closing high, with afternoon selloffs acting as the culprit for the botched attempts. The longer the index hovers around 1850 (it traded as high as 1852.65 Wednesday and finished at 1845.16), the greater the downside risk for the broad market, traders say.
Still, that hasn’t stopped the momentum stocks from hitting new highs. And for now, there appears to be little getting in the way of these names continuing their upward trajectory.
Morning MoneyBeat Daily Factoid: On this day in 2007, the Shanghai Stock Exchange fell 9%, its largest drop in 10 years. The tumble—dubbed the “Chinese Correction”—transpired as rumors circulated China would raise interest rates to curb inflation. The panic spilled into the U.S., as the Dow Jones Industrial Average slumped 416 points, its biggest one-day slide at the time since 9/11.
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