The small caps were the leaders of this run and generally seem to be in favor January most years. However one thing to note is their negative divergence the past three sessions. Yesterday was a strange session as a lot of consumer staple (defensive) type of things were moving with the natural resource stocks, while a lot of other areas of the market were flat to negative. Today we see the S&P 500 flattish while the Russell 2000 is down about half a percent. That is about the same gap as we saw yesterday.
As for the Fed obviously there is no expectation of anything new but we'll see how the market reacts to any language. With the GDP print today most likely the language they might have been planning to use yesterday might be downgraded but we'll see. We are now in a perverse world where positive language may be construed as negative. With such a large move in January in markets there are now a lot more opportunities for negative surprises or what the market perceives to be a negative at least i.e. a "good jobs number" might bring the market's perception (realistic or not) for Fed tightening closer.
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