Dow Down Below 25,000 Mark In Pre-market Trade

The three main stock market indexes in the U.S. are down this morning; in fact, the Dow has again dipped below the psychologically pleasing 25,000 mark in today’s pre-market. Yet the small-cap Russell 2000 index — although it is also down marginally ahead of today’s opening bell — remains trading near all-time highs. So why the discrepancy?

Small-cap stocks exist in a much smaller business habitat than do global large-caps of the kind we see on the Dow, Nasdaq and S&P 500. So the contagion of global headwinds is much less likely to affect small-cap stocks, especially in the near-term. And with economic data coming in with uncommon and relentless strength, by all historical measures, small-caps represented in the Russell 2000 reflect the very favorable domestic business environment.

But large-caps now have some serious headwinds with which to contend, at least theoretically. Now that things like a 25% tariff on imported steel is kicking off a tit-for-tat “trade war” between U.S. and its top trading partners — China, Canada, the European Union (EU), etc. — expectations are for a wet blanket to be thrown on these hot economic metrics. Mostly its the uncertainty at this point; we really don’t know just what the impact of trade static will be here in the U.S. or anywhere else.

Aside from the perception of a burgeoning trade war, we’d be in error to avoid considering that the U.S. market’s strong growth is pulling the U.S. dollar into a higher value range than we’ve seen in more than a decade. This could affect trade, not to mention retail, if the U.S. gets more expensive to deal with. Also, oil & gas prices have finally gained some traction after years of supply glut keeping prices per barrel low. This is making global business more expensive, as well — and this has a direct impact on large-cap stocks.

Elsewhere, shares of Rent-a-Center RCII have rocketed up more than 22% in today’s early trading following an announcement that it has agreed to a $1.37 billion buyout by private investment firm Vintage Capital. The total amount breaks down to $15 per share, more than twice what RCII’s low mark was year to date, when the stock was trading below $7.50 per share. The Zacks Rank #3 (Hold) company had a Zacks Style Score (Value - Growth - Momentum) of A. Owners of this stock are sitting pretty this morning.

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