The Dow Celebrates Alone

The blue-chip Dow Jones Industrial Average was the outlier, marking yet another all-time closing high after soaring to a new intraday all time high as well. The Dow finished up 0.3% at 13,383.84 after reaching 13,481.60 intraday. The S&P 500 fell 0.1% to 1501.19, and the Nasdaq Composite slid 0.8% to close at 2525.29.

Market internals reflected the action in major averages: Declining stocks bested advancers by 19 to 12 on the Big Board and by better than 3 to 1 on the Nasdaq, where up volume was just 22% of the 2.1 billion-share total.

The divergence in the stock market highlights the U.S. economy's delinking from, and dependence on, other economies around the globe.

The Russell represents unbridled growth in the U.S., while the large-cap Dow represents unbridled growth in the world. With the U.S. well into its midcycle slowdown, the global growth bet is safer.

Indeed, Europe and Asian economies are working to put the brakes on their economies. Only the U.S. is out there talking about rate cuts. Executives of large-cap multinational companies' repeatedly said their earnings are swelling because of overseas sales, not growth at home.

Supporting the big-cap Dow Tuesday were 16 of its 30 components ---General Motors(GM) surged 4.4%; Verizon(VZ) and Alcoa(AA) gained over 2% apiece.

The Russell-Dow divergence is also similar to the divergence between headline and core inflation, and a reminder of the same global dynamics. Headline consumer inflation, which includes the costs of energy and food, is running at a 5.6% year-over-year rate, rising amid global demand for energy and basic materials. Core inflation, which includes the falling cost of housing in the U.S., has mellowed to a 2.3% year-over-year rate.