The narrative of a broadening rally continues. Not only are more stocks participating (82% above their 200-day moving average), but the S&P 500 rallied Friday with all three growth sectors lower.

As the rally broadens, everyone is watching small-caps for opportunities. They are undoubtedly on the rise.

The S&P 600 Small Cap Index has underperformed so severely against the S&P 500 that it is far from breaking out. The S&P 600, which has better quality names than the Russell 2000 ,is farther behind.

The iShares Russell 2000 ETF could make a breakout that would alter risk-reward calculations.

Powell Chillin’ Like a Villain

On Friday, Chair Powell echoed comments from NY Fed Governor Waller: They can wait on rate cuts but will cut rates anyway.

“The fact that the US economy is growing at such a solid pace, the fact that the labor market is still very, very strong, gives us the chance to just be a little more confident about inflation coming down before we take the important step of cutting rates.” -Powell

PCE

The Personal Consumption Expenditure (PCE) report on Friday had something for everyone, and even those who wanted a grand slam were quick to ignore or write-off the spike in the three-month change.

The savings rate crashed to 3.6% from 4.1% due to a combination of doom spending and inflated prices, as real wages declined month-over-month.

Today’s Session

The first quarter was all about US large cap stocks but developed markets and small caps started to come on. 

While the street has been able to ignore the sharp decline in the assumed rate cuts for this year, the Fed still holds the keys to money making big moves among asset classes.

 

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