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The most defensive stocks in the U.S. this week have been some of the riskiest. To Prudential Financial Inc., that bodes well for the rest of the market.
Small-caps, whose 13 percent plunge starting in March presaged losses that have erased $2 trillion from equity prices, are up 3.5 percent in three days, beating everything from high-dividend payers to makers of consumer staples. Strength in the Russell 2000 Index (RTY) comes even as a measure of larger companies known as the Russell 1000 Defensive Index drops.
Advances this week in Overstock.com Inc. (OSTK) to Martha Stewart Living Omnimedia Inc. show investors are regaining confidence that should bode well for a recovery in the Standard & Poor?s 500 Index, according to Quincy Krosby, a market strategist at Prudential Financial. They?re rising after suffering some of the worst losses in the equity market this year when investors bailed on stocks with the highest valuations.
?Going into small-caps shows that investors are willing to take on risk at the right price,? Krosby said by phone from Newark, New Jersey. The firm oversees more than $1 trillion. ?Small-caps serve as a barometer for the broader market. They usually run up when there?s an underpinning of domestic growth.?
The Russell 2000 rose 0.7 percent to 1,092.90 at 10:46 a.m. in New York. The measure?s 1.3 percent gain yesterday capped the biggest three-day advance since June. Broader stock measures did worse, with the S&P 500 ending little changed and the Dow Jones Industrial Average sliding for a sixth day.
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