Upcoming stock markets: small businesses are getting crushed

the Russel 2000 (RUT) index, which houses companies like crocs (CROX), BJ Wholesale (BJ) and others with an average market valuation of around $ 3 billion, now trading more than 10% below its 52-week high. This means that it is in a so called correction.
An iShares exchange-traded fund of micro-capitalization shares (CBI) (which are even smaller than those of the Russell 2000) is almost 15% below its peak. It is therefore potentially heading towards a bear market.

This is troubling because most small US businesses depend more on the US economy (and US consumers) for their income and profits than the Dow and S&P 500 giants. They don’t generate as much revenue and profit. in markets around the world.

So tough times for small stocks might be a more accurate barometer of the U.S. financial landscape than what is happening with big tech companies like Apple (AAPL), Microsoft (MSFT) and owner of Google Alphabet (GOOGL) – which held up much better during the recent market downturn.

“Peel the onion in one layer and there has been a more severe inventory turnover below the surface,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.

Sonders noted that many of the smaller companies in the S&P 500 beyond the best tech have been subject to big fixes over the past year. It’s just that there are enough “pockets of strength” among the large companies in the index to mask the broader weakness in the overall market.

This discrepancy has caught the attention of other Wall Street strategists as well.

David Wright, co-founder of Sierra Mutual Funds, noted in a recent report that many more stocks on the NYSE and Nasdaq have hit new 52-week lows rather than highs in recent times.

“What this means is that only a few large stocks are holding the indexes together, while a growing number of stocks are already in a bear market,” Wright said.

The decline in the smaller equity market is one of the main reasons the CNN Business Fear & Greed Index has suddenly plunged into almost “extreme fear” territory after recording levels of “extreme greed” just over a month ago. The declining stock volume is also higher than the rising one.
Small businesses also may not be able to pay workers higher wages as easily as corporate giants. Profit margins (and overall revenues) could suffer as they try to stay competitive with wages, bonuses and other compensation.

Memes Mania Return?

GameStop (GME) will release its results after the close on Wednesday. The stock, as well as the cinema chain AMC (AMC), has become synonymous with the meme marketer-fueled stock revolution on Reddit and other social media sites.

GameStop shares have risen over 850% so far in 2021. But the title has seen an extremely bumpy course, to say the least. GameStop is also trading at almost 65% below the record level it reached in January.

It’s easy to forget that GameStop is actually a legitimate business and not just a “stonk” that has become a toy for traders trying to punish short-selling hedge funds that bet against the company.
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For what it’s worth, there is growing hope that the company’s business will turn around under Matt Furlong, the new CEO and former Amazon (AMZN) executive who joined GameStop earlier this year.
GameStop has also made a bigger push in e-commerce since soft (CHWY) co-founder Ryan Cohen took a large stake in the company and was later named chairman.

The company is still expected to record a loss for the current quarter. But Wall Street is forecasting a profit during the holiday period that ends in January and expects GameStop to make money in its next fiscal year.

Demand for video games on GameStop is expected to be strong. The biggest challenge could be Microsoft’s widely publicized Xbox Series X shortages and from Sony (END) PS5 consoles due to global supply chain issues affecting semiconductors.


Monday: factory production in Germany

Tuesday: Automatic zone (AZO), Toll brothers (TOL), Point correction (SFIX) earnings
Wednesday: Chinese trade report; Campbell Soup (CPB), Brown-Forman (BFB), GameStop wins
Thursday: inflation in China; unemployment claims in the United States; Hormel (HRL), Costco (COST), Broadcom (AVGO), Soft, Lululemon (LULU) earnings

Friday: US consumer prices; Consumer sentiment at the University of Michigan

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