Stocks Gain At Week’s Start

Stocks Gain At Week’s Start

Wall Street opened higher on Monday, even as a report showed consumer spending fell in December.



Stocks Gain At Week’s Start
Stocks Gain At Week’s Start

The decline was the worst in five years but investors felt it was not indicative of a larger trend.

Consumer spending dropped 0.3% in December, more than most analysts’ forecast of 0.2%. But the decline came on the heels of two months of meaningful advances, in addition to Friday’s strong data on personal consumption in the fourth quarter. Altogether, the positives outweighed the setback for spending in December.

“Consumers are in a good mood coming into 2015, and we think that’s likely to continue,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, told Bloomberg. “The prospects for 2015 look very encouraging.”

The S&P 500 and Dow both gained 0.2%, while the Nasdaq registered a slight increase of 2 points.

Investors turn to small business
As the US dollar strengthens, oil prices collapse and big banks report lower earning, large corporations have struggled to increase revenues abroad. For that reason, investors have increasingly put their faith in smaller companies, The Wall Street Journal reported. Economists believe this confidence in small business is the result of a strong domestic economy.

“Small-cap consumer [stocks are] the sweetest spot in a way,” Benjamin Nahum, portfolio manager of Neuberger Berman, told The Wall Street Journal. “That’s where you get your full bang for record consumer confidence.”

The Russell 2000 – an index of small-business stocks – has performed better than some major US indices so far this year. In the last three months, the Russell 2000 has lost 0.7%, as opposed to 1.1% and 1.3% declines in the S&P 500 and Dow. Compared with 2014, the Russell 2000 is in a much better position.

Small businesses are more protected from global concerns than their large-cap cousins and small companies’ profits are growing more rapidly. Those factors make for a strong market.

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