The second quarter isn’t over yet, but the end is near. That means the stock market is apt to be influenced by rebalancing dynamics, and it appeared yesterday as if the stock market encountered such activity.<\/p>\n\n\n\n
The mega-cap stocks, which have been stalwarts during the second quarter (and all year for that matter) ran into a rush of selling interest. That sent the Vanguard Mega-Cap Growth ETF (MGK) 1.3% lower, which weighed heavily on the market-cap weighted S&P 500 (-0.5%).<\/p>\n\n\n\n
An interesting undercurrent is that the Invesco S&P 500 Equal-Weight ETF (RSP), the Russell 2000, and the S&P Midcap 400 Index, which have not been stalwarts in the second quarter (or all year for that matter) outperformed and ended the session with modest gains.<\/p>\n\n\n\n
Similarly, Treasuries eked out some small gains.<\/p>\n\n\n\n
There is still a long way to go in this trading day, but the early look favors a mixed start for stocks.<\/p>\n\n\n\n
Currently, the S&P 500 futures are up six points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 53 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average futures are down 27 points and are trading 0.1% below fair value.<\/p>\n\n\n\n
This imbalance reflects some tipping of the scales, with mega-cap stocks back in a position of relative strength. Alphabet (GOOGL)<\/strong> is an exception as it grapples with a Bernstein downgrade to Market Perform from Outperform on the heels of a UBS downgrade yesterday to Neutral from Buy.<\/p>\n\n\n\n The question now is, will this relative strength hold for the duration of today’s session or will these stocks ultimately face another rebalancing roll?<\/p>\n\n\n\n