Stock Market Today: Small Caps Roar Despite Lousy Unemployment Data

Hopes among investors for yet another round of federal stimulus were at least momentarily offset by a significant employment setback Thursday. But, while the major blue-chip indices yielded ground, small-cap stocks continued their red-hot 2021.

Initial jobless claims for the week ended Jan. 9 came in worse than expected, to 965,000, from 784,000 in the prior week.

"The increase in the pace of job separation initially peaked in the week ending December 12, when initial claims registered 892k, and then gradually subsided thereafter through the week ending Jan. 2," say Barclays analysts. "This week's increase reverses that improvement and leaves initial claims at their highest level since late August."

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However, Brad McMillan, chief investment officer for Commonwealth Financial Network, says "the economic impact (of rising jobless claims) will be limited by the recently passed stimulus bill, which will provide support for those laid off and help preserve confidence and purchasing power."

A third stimulus bill could lend even more support. President-Elect Joe Biden is expected to unveil a COVID relief and vaccination plan tonight, and the package, which multiple reports tag at roughly $2 trillion, is expected to include additional direct payments to Americans.

The Dow Jones Industrial Average lost 0.2% to 30,991; Intel (INTC, +4.0%) was tops among its 30 components as Wall Street continued to cheer the ouster of its CEO, while Visa (V, -3.6%) led the way lower.

Other action in the stock market today:

• The S&P 500 declined by 0.4% to 3,795.
• The Nasdaq Composite slipped 0.1% to 13,112.
• Gold futures declined 0.2% to $1,851.40 per ounce.
• U.S. crude oil futures had another great day, improving by 1.3% to settle at $53.37 per barrel.
• Bitcoin prices, at $35,916 on Wednesday, improved to $39,633. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)

Small-Cap Stocks Keep Soaring

Blue chips' meek performance stood in stark contrast to the Russell 2000, as the small-cap index didn't just top its previous high yet again -- it cleanly punched through it. The Russell's 2.1% advance Thursday, to 2,155, gives it a wild 9%-plus return just half a month into the new year.

"Investors have gravitated to small caps and value stocks, particularly as earnings growth, relative depressed valuations (after 13 years of underperforming against growth) and the prospect of stronger GDP growth, a weaker dollar and perhaps rising rates, or at least a yield curve steepening, have caught investors' attention," says James Gowen, chief investment officer, small-cap equities, at Spouting Rock Asset Management.

He points to heightened activity in initial public offerings (IPOs), as well as soaring returns for a number of clean energy stocks.

Gowen also notes that small caps aren't as well-covered by the analyst community as their larger brethren, but fortunately the pros do dedicate some bandwidth to scouring these explosive opportunities.

Here, we've outlined 11 of the most promising stocks in the entire Russell 2000, as determined by the analyst set. In many cases, these stocks have already developed a following because of their outsized 2020 gains, but they're largely expected to keep generating abundant returns as 2021 unfolds.