Stock market leadership points to strength

NEW YORK — There might be a lack of leadership in Washington about the debt fight, but that hasn't stopped traditional bull market leaders from heading the performance derby in the stock market.

Small-company stocks, perennial bull market favorites, are again leading the pack on Wall Street.

The sector made a new bull market high Monday despite the political gridlock that has placed the nation in grave fiscal danger as Thursday's deadline to raise the nation's borrowing limit ticks closer.

Semiconductor stocks also are exerting their leadership potential, as are new issues that recently began to trade in public markets after offering stock to the public for the first time.

"The leadership backdrop remains favorable," Chris Verrone of Strategas Research Partners told clients in a research note.

Despite the market angst about the 15-day-old government shutdown and the fight about raising the debt ceiling, the stock market has been led by offensive stocks, not defensive ones, which is an encouraging sign.

When go-go stocks with upside potential — such as fast-growing small companies, chip stocks or recent initial public offerings — are on the move, it means investors are still willing to take risks to make money, Verrone says.

The hot IPO market by itself signals that investors' animal spirits haven't been snuffed out by the government's inability to agree on a debt-related deal.