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It’s tough to get a firm handle on this market. One day it looks like a trading rotation into undervalued equities from big run-ups elsewhere, the next day it’s a major selloff across the board. This day, we were back to the “rotation” scenario: the Dow gained +81 points, +0.20%, and the small-cap Russell 2000 kept up its two-week dominance, +1.47%, while the S&P 500 sold off another -0.51% and the Nasdaq -0.93% following the single-worst trading day of 2024 (so far).

During the massive gains on the A.I. trade a year-plus ago, the Nasdaq and S&P pulled way ahead. Small-cap stocks, including regional banks and such, were left out in the cold. Now, with the A.I. trade long in the tooth and the promise of an interest rate cut from the Fed (not likely next week; more like September’s meeting), it’s the small-caps catching a bid. Since July 10, the Russell is +9.8% while the Nasdaq is -8.3%. That’s a fairly wide gap in just two weeks and a day.

Two major retailers reported this afternoon. Deckers (DECK - Free Report), the maker of Hoka footwear, UGG boots, and more, posted a giant beat on its fiscal Q1 bottom line: earnings of $4.52 per share blew the doors off the $3.59 expected and the $2.41 per share from the same quarter last year, for an +87% earnings beat overestimates. Revenues of $825 million outpaced the $805.5 million estimated, a +22% year-over-year increase. The company only had one earnings miss in the past five years.

That said, earnings guidance, while higher, is still below consensus. A range of $29.75-30.65 per share remains below the $30.81 earlier estimate Zacks analysts had surmised. Shares are still +7.9% in late trading, as the overall quarterly results are solid. Hoka grew +29.7% from a year ago, UGG was +14%, Teva +4.3% and the company will be divesting from its smaller, underperforming Sanuk brand, which brought in less than $7 million in the quarter.

Skechers (SKX - Free Report) also reported Q2 earnings after the close. The less-expensive portfolio of footwear and accessories missed on both top and bottom lines: earnings of 91 cents per share on $2.16 billion in revenues were shy of the 94 cents per share and $2.22 in sales anticipated. This breaks the six-quarter earnings winning streak, though the company did announce a $1 billion share buyback. The company also raised guidance going forward. Shares are up +2.8% on the news.

Friday morning, we’ll see Personal Consumption Expenditures (PCE) for June. This will be the last major non-jobs-related economic print ahead of the week’s Fed meeting, and the Fed’s favorite set on inflation metrics. Year-over-year expectations are for headline PCE to tick down to +2.5% from +2.6% in the previous month, with core year-over-year PCE staying at +2.6%, steadily coming down over the longer term. PCE has basically been cut in half over the past two years or so.

We’ll also see the latest batch of earnings reports. 3M (MMM - Free Report) expects both earnings and sales to come in lower by double digits, Bristol Myers-Squibb (BMY - Free Report) is expected to come in lower on earnings but higher on revenues, and Colgate-Palmolive (CL - Free Report) expects double-digit earnings growth and single-digit sales growth. All three companies currently carry a Zacks Rank #3 with a Value-Growth-Momentum score of C.

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