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Stocks Close Lower But Small Caps, Retail, REITs, Utilities Ignore Sellers

The stock market closed lower Thursday, but small caps and a handful of sectors bucked the selling. Meanwhile, Netflix (NFLX) continued to struggle.

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The Russell 2000 rallied 0.5% and nearly made a new high, thanks to strength in small-cap health care and financial companies. Among ETFs, Invesco S&P Smallcap Financial (PSCF) climbed 0.9% and Invesco S&P Smallcap Healthcare (PSCH) rose 0.6% to a new high.

The Dow Jones industrial average fell 0.5%, ending a five-day win streak. On the Dow, insurance company Travelers (TRV) tumbled nearly 4%, offsetting a 3% gain for IBM (IBM). Both companies reported earnings.

The S&P 500 and Nasdaq composite fell 0.4%. Volume rose on the NYSE and fell on the Nasdaq, according to early data. Breadth was positive, with winners over losers by 3-2 on the NYSE and by nearly 6-5 on the Nasdaq.

Losses in the major indexes masked certain sectors that had perfectly fine performance Thursday. The retail sector was another leader, with auto parts stores, home furnishings, consumer electronics and department stores among the top 10 of 197 industry groups Thursday.

Best Buy (BBY) broke out of a cup-with-handle base. Shares of the electronics chain topped a 78.07 correct buy point but volume came in 4% below normal levels.

Some interest-rate sensitive sectors outperformed. Real estate investment trusts (or REITs for short) also excelled. The SPDR Dow Jones REIT ETF (RWR) climbed more than 1%. Utilities were another sector up more than 1%.

REITs and utilities are dividend-rich assets that tend to gain favor when Treasury yields decline. On the whole, yields have been basically flat for about two weeks. But there was some concern in the bond market after President Trump voiced objections over the Fed’s path on raising interest rates. Trump, in an interview on CNBC, also said he had misgivings about the strong U.S. dollar.

Energy stocks were mixed. Pipeline operators were one of the top groups. Energy Transfer Partners (ETP) broke out of a cup with handle base, closing above the 19.88 buy point in heavy trading.

Internet, networking and some software industry groups were among the weakest, contributing to the Nasdaq’s drop.

Netflix, which got cut to a half-size position on IBD Leaderboard on June 14, closed below its 50-day moving average. That’s significant because Tuesday’s rebound from a post-earnings sell-off gave hope that Netflix would find support at that level. So far, it’s not materializing. There was more bad news for the company Thursday, after a report that Walmart (WMT) may enter the subscription streaming video market.

The IBD 50 fell about 0.3%. ZTO Express (ZTO) took a 5% beating that at one point took shares more than 8% below the 21.80 buy point of Monday’s breakout. The stock did bounce off its 50-day moving average, which helped control the damage.

ZTO is one of the newest members in IBD Leaderboard.

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