US stocks saw little movement, with major indices closing within 0.03% of unchanged. The S&P 500 finished marginally up by 0.02%, while the Nasdaq saw a minimal decline of 0.01%.
The Dow industrial average ended the day down by 11.01 points or 0.02%, closing at 44,911.26. The S&P index increased by 1.96 points or 0.03%, reaching 6,468.54. Meanwhile, the NASDAQ index fell by 2.47 points or 0.01%, concluding at 21,710.67.
Russell 2000 Performance
The Russell 2000 index, representing small-cap stocks, decreased by 28.97 points or 1.24%, ending at 2,299.08.
Intel shares rose by $1.64 or 7.3% to $23.86 after news of potential US government investment. Nvidia’s shares edged up by 0.24%, while AMD’s fell by 1.88% and Broadcom’s increased by 0.69%.
Netflix shares rebounded, increasing by $26.12 or 2.17%, while Amazon’s shares climbed by 2.86%, recovering from previous declines.
With the major indices stalled at record highs, we are seeing a significant warning sign as small-cap stocks fall sharply. This divergence, where money flows into a few large-cap names while the broader market weakens, suggests underlying caution among investors. The S&P 500’s tight trading range points to a potential consolidation before a larger move.
Volatility And Market Trends
The CBOE Volatility Index, or VIX, has been trading near its yearly lows, recently around 13, making options relatively cheap. Given that we are entering a historically volatile period for stocks in late August and September, buying protective puts on indices like the SPX could be a cost-effective hedge. This low implied volatility presents an opportunity to prepare for a potential market downturn.
The surge in Intel’s stock based on government discussions, rather than business fundamentals, has significantly increased its implied volatility. We see that the cost of options on Intel has jumped, creating a chance to sell premium if we expect the stock to trade sideways after this initial excitement. This is a classic case of political news creating short-term trading opportunities in a specific name.
Looking back at the market pullbacks we experienced in September of both 2023 and 2024, the current setup feels familiar. The market’s lack of upward momentum, combined with the weakness in small-caps, warrants a defensive posture. We will be closely watching for a break below the S&P 500’s recent support levels as a signal to increase our bearish positions.
