'Nifty' growth stocks keep the bears at bay, for now

It would be a nifty trick if the big stock indexes can keep holding their ground as asset markets around the world beat a retreat.

We’re seeing a slow-motion crash in emerging markets currencies and their stocks, as partially gauged by the iShares MSCI Emerging Markets ETF (EEM).

Global commodities prices are collapsing, in a move closely linked to the painful EM hangover. The fund under ticker GSG, which tracks the Goldman Sachs Commodity Index, is near a five-year low.

The credit markets are looking wobbly, too, with yields on junk bonds stubbornly lifting, largely due to weakness in energy and commodity issuers.

And energy and industrial stocks here are being tossed aside, too, with 3M Co. (MMM), Caterpillar Inc. (CAT) and Illinois Tool Works Inc. (ITW) joining United Technologies Corp. (UTX) in the market's field hospital.

The reason the S&P 500 (^GSPC) is slightly positive for the year is the impressive performance of a tight group of expensive glamour stocks of quality growth companies.

That’s why I say continuing to hold up would be nifty: This was the makeup of what became known as the Nifty 50 market of the late 1960s and early ‘70s – a few dozen companies everyone loved and owned that held up the Dow for years.

We’re not to the extremes of those days, but with the Nasdaq 100 index (^NDX) up 8.7% year to date with the Dow Industrials (^DJI) down half a percent, this bifurcation is clear. The Guggenheim S&P 500 Equal-Weight fund (RSP) is almost exactly flat for the year, showing no gain for the so-called “typical stock.”

Just look at the run of well-received corporate results from last night for further proof: Starbucks (SBUX), Visa (V) and most of all Amazon (AMZN) were all leading stocks heading into the numbers and all delivered on pretty high hopes, spurring more investors to crowd into the stocks overnight.

Amazon is in the very elite of this group, and also represents what’s been a very "GAAP-y" market, so to speak. This isn’t just GAAP as in generally accepted accounting principles – according to which Amazon posted an uncharacteristic net profit.

GAAP can also stand for “growth at any price,” which appears to be a preference of this market, rewarding the stocks already sporting the highest valuations with still more value.

But the stock and others like it have also jumped in huge "gaps," creating a step function of value creation that flatters the indexes yet is impossible to “catch” without already having owned the stocks.

Taken together, the immediate gaps higher in the shares of Amazon, Google Inc. (GOOGL) and Netflix Inc. (NFLX) following earnings and Celgene Corp. (CELG) after announcing a big acquisition 10 days ago added some $85 billion in market value.

Those instant pops in just four stocks almost exactly offset the value decline during the past month in the small-cap Russell 2000 index (^RUT), which contains nearly 2,000 issues.

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Much of this action reflects stark variation in fortunes and prospects across multiple fronts. The American consumer seems to be running pretty hot, with Under Armour Inc. (UA), Starbucks and others raking it in. Housing is gaining steam.

Yet global sellers of capital goods are struggling and the China slowdown is challenging investors’ faith that the authorities can steer that economy where they want.

And this creates a split in the outlook for central-bank policy: The lowest weekly jobless claims number in 42 years yesterday supports the desire for the Fed to start tightening, even as the global markets – in their deflationary price action and abiding debt hangover – beg for more easy money.

With all these opposing currents, the S&P 500 remains stuck, for now. Yesterday was the 36^th day in the past five months when the index crossed the 2100 mark.

There’s nothing significant about that round number except it’s where the trenches seem to be dug by the bulls and bears fighting out this stalemated market.

It’s tough to see how the indexes and those nifty stocks can remain this stretched relative to the retreating cyclical assets elsewhere for too much longer. The bulls might need some reinforcements.

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