By William Watts, MarketWatch
U.S. investors pile into value stocks, dump momentum
Stock-index futures edged higher Wednesday, as global equities rose amid optimism over trade and expectations for additional central-bank stimulus.
Futures on the Dow Jones Industrial Average rose 44 points, or 0.2%, to 26,938, while S&P 500 futures were up 2.75 points, or 0.1%, at 2,981.25. Nasdaq-100 futures gained 3 points, or less than 0.1%, to 7,817.50.
The Dow saw its fifth straight gain Tuesday, rising 73.92 points, or 0.3%, to end at 26,909.43 -- marking its longest winning streak since a six-day run that ended on June 10. The S&P 500 eked out a gain of 0.96 point to end at 2,979.39, while the Nasdaq shed 3.28 points, or less than 0.1%, to close at 8,084.16.
While markets have appeared calm on the surface, a heavy internal rotation continued Tuesday as investors dumped previously market-leading momentum shares in favor of previously out-of-favor value stocks. Momentum strategies focus on buying shares that have previously gained and have offered outsize returns for much of the current bull market, while value shares have lagged behind.
Tuesday's action saw the iShares Edge MSCI USA Momentum Factor ETF (MTUM) fall 1.5%, while the iShares Edge MSCI USA Value Factor ETF (VLUE) rallied 1.4%. So far this week, MTUM is down 3.1% versus a 3.2% rise for VLUE.
Also see:Energy, financial stocks soar: Oversold bounce or the beginning of a breakout? (http://www.marketwatch.com/story/energy-financial-stocks-soar-oversold-bounce-or-the-beginning-of-a-break-out-2019-09-10)
Small-cap shares have also rallied, with the Russell 2000 rising 1.2% Tuesday to give it a 2.5% rise so far this week versus a largely flat performance for the large-cap S&P 500.
"From a technical perspective, the rally in small-caps is the most important development of the week, so far, as the Russell 2000 hit a five-week high outperforming its large-cap peers," said Ken Berman, strategist at Gorilla Trades, in a note.
The Russell has lagged behind the broader market for several months and remains more than 10% below its all-time high despite a recovery over the past couple of weeks, he said, noting that this weeks' move has seen it move back above both its 50- and 200-day moving averages -- viewed as measures of short and longer-term momentum, respectively -- for the first time since late-July. If the Russell remains "relatively strong," major indexes could be on track for a round of all-time highs, he said.
Meanwhile, Treasury prices remained under pressure, driving up yields, after an August rally. The rebound in yields, which move in the opposite direction of debt prices, reflect easing worries over the U.S.-China trade battle, at least for now, as officials from both countries prepare for renewed talks. Investors also look for the European Central Bank to deliver a rate cut and potentially other measures when policy makers meet Thursday, while the Federal Reserve is expected to deliver another rate cut when it meets next week.
The economic calendar on Wednesday features the August producer-price index at 8:30 a.m. Eastern Time, which is forecast to come in flat after a 0.2% July rise. July wholesale inventories are due at 10 a.m.
(END) Dow Jones Newswires
September 11, 2019 07:01 ET (11:01 GMT)
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