Stock Market News For July 30: F5, Database Stock Top Buy Points Premarket

Wells Fargo analysts are skeptical of small caps as they outperform the stock market.

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Since July 10, the Russell 2000 index outperformed the S&P 500, racing about 9.5% in that span vs. a 2.6% decline for the S&P 500. Looking at prior periods when small caps beat the S&P, such as the 2016 election and the 2018 tariff rally, Wells Fargo Investment Institute sees small caps fading.

In each past scenario, relative returns turned negative in the 6- and 12-month periods following the small-cap rally’s peak. Small caps went from winners to losers of 6% to 16%.

“In our view, the recent rally is likely unsustainable as the fundamental support for small caps is lacking,” Wells Fargo said in its report. “Over 40% of companies in the Russell 2000 Index are non-earners, and the group lacks the balance-sheet flexibility and pricing power that would likely benefit large caps in the economic slowdown we are expecting. We suggest investors to not chase recent small cap gains.”

F5, Varonis Break Out

F5 (FFIV) is trying to break out of a cup base as shares surged more than 10% in early  stock market trading after a strong earnings report.

Shares of the cloud networking technology company are trading near the 196.35 buy point of a cup base. They are on pace for largest increase since June 7, 2016, when F5 soared 12.6%.

F5 late Monday reported June-quarter sales and earnings that topped expectations. The company also raised its outlook. JPMorgan Chase, Needham and several other analysts raised their price targets on F5.

Varonis Systems (VRNS) broke out of a cup-with-handle base in heavy volume at the open. Shares were up more than 14% and above a 51.74 buy point.

The company, which owns a 96 Composite Rating, reported second-quarter earnings and sales that came in well above analyst estimates, according to FactSet. Barclays, Piper Sandler and other firms raised their price targets on the data management and security provider.

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