Is small beautiful?

Technology is underperforming as highlighted by the S&P's recent trends, with Information Technology and Communication Services lagging. Despite this, the equal-weighted S&P 500 reached a new high, while the index is up approximately 15% year-to-date.

Key support levels are at 5,250 and around 5,000 for the 200-day moving average. Earnings reports show that 75% of S&P 500 companies have exceeded earnings estimates for Q2, with overall earnings growth at 12% year-on-year.

Sector performances point to strong growth in Financials, Health Care, Communication, and Technology. There has been a shift toward smaller companies and value stocks, with expectations of double-digit earnings growth for smaller firms next year.

However, approximately 44% of Russell 2000 companies are unprofitable, raising concerns as historical trends indicate increasing unprofitability during economic cycles. Consumer confidence remains relatively strong, but the labor market shows fragility with only 114K jobs added in July and a rise in unemployment to 4.3%.

Manufacturing continues to contract, and construction spending has declined. On a brighter note, productivity is increasing, which may help manage inflation.