The stock market marched back into record territory Tuesday as investors seized on the latest encouraging news about the economy. This time, it was a report on the health of small businesses.
Small-business owners were slightly more optimistic in April, according to a survey released by the National Federation of Independent Business before the stock market opened. That helped push the Russell 2000, an index of small-company stocks, up 1.3 percent, ahead of other major indexes.
“Small businesses are in many ways the backbone of the economy. ... To see that index move up was a positive surprise,” said Quincy Krosby, market strategist for Prudential Financial. “Overall, the market wants to move higher, and it’s hard to fight that.”
The Russell index is 16.1 percent higher since the start of the year, and is up more than the Standard & Poor’s 500 index, which includes larger, global companies. Small stocks are doing well partly because they are more focused on the U.S., which is recovering, and don’t get as much revenue from recession-plagued Europe as larger companies do.
The advance in small-company stocks is another sign of how optimistic investors have become. Smaller stocks are more risky than large ones, but also offer investors the prospect of greater returns in a rising market.
Another closely watched stock-market indicator also has been on a tear: transportation stocks. The Dow Jones transportation average rose 1.9 percent Tuesday and is up 21.8 percent this year, far more than other major indexes. Investors often see these stocks as an indicator of where the economy is headed. When companies make and ship more goods, the thinking goes, truckers, airlines and railways do more business.