Small Caps Lead Stock Indexes; Fed Meeting Begins

Small caps advanced late Tuesday morning, but most U.S. stock indexes lingered just under the break-even line. In the meantime, the Federal Reserve began its two-day meeting.


The small cap Russell 2000 rose 0.3%, while the Nasdaq added 0.2%. The blue chip Dow Jones industrial average and large cap S&P 500 each crept 0.1% higher.

Volume fell in both major indexes vs. the same time Monday.

Blue chips rising outnumbered those falling by a 9-to-5 ratio. Restaurant chain McDonald’s (MCD) popped 2% to lead the 30 Dow components. Chipmaker Intel (INTC) lost 1.5%.

McDonald’s is working on a consolidation of 35 weeks. The stock is 7% off its high.

Intel is 20% off its high. Raymond James on Tuesday downgraded the stock from market perform to underperform. Raymond James also downgraded the chip sector.

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In the S&P 500, Marathon Petroleum (MPC) climbed 2% in fast trade. The stock was on track for a fourth straight gain. Marathon retook a cup-with-handle buy point Friday. Marathon is now 6% above a 82.71 buy point. A stock should not be bought more than 5% above a valid buy point: The chance of getting pressured by normal action is too great.

Light sweet crude oil advanced 0.2% to $72.21 a barrel.

Oil stocks breaking out Tuesday included oil explorer Oasis Petroleum (OAS), up 1.5% in strong volume and Norway-based Equinor (EQNR), up 4% in heavy volume.

On Tuesday, 21 oil stocks marked new highs, according to preliminary data.

Among IBD’s 197 industry groups, the day’s best performers included gold miners, steel producers and oil. The worst performers were semiconductors and airlines.

Odds For Rate Hike

The Federal Reserve convened Tuesday. The Street expects the Fed to raise interest rates Wednesday from a range of 1.75%/2% to a range of 2%/2.25%. CME Group’s FedWatch Tool sees a 94.4% chance of a rate hike.

Bank stocks were up modestly in late morning action. They are expected to benefit from higher interest rates. The 10-year Treasury yield was up 1 basis point to 3.10%.

Stalemate On Trade

Trade disputes between the U.S. and China and the U.S. and Canada continued to elude solutions. China appears content to wait for the results of the U.S. congressional elections, which are six weeks away.

President Trump has accused China of “trying to impact and change our election.” Any doubts about that were cleared up Sunday. China paid for a four-page insert that ran in Iowa’s Des Moines Register. The Sunday insert touted Chinese views on trade.

Meanwhile, Canada negotiations appear stalled.

(For updates on this story and other market coverage, check IBD’s stock market news today.)


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