Stocks remain lower as economy worries boil up; MSFT disappoints
Small-cap stocks remained solidly lower into mid-session, pulled down by renewed worries over the economy and a dreary profit report from key firm Microsoft. The slide was relatively broad-based, with energy and financial companies taking a bit hit today. At 1:21 p.m. ET, the Russell 2000 (NYSE:IWM) was down 15.82, or 3.46%, at 440.94.
Small caps slipped down near 435 for the intraday low, so the bounce back up to 440 was a decent silver lining in today’s storm clouds. Still, the chart picture has rolled over into a bearish posture within the elongated sideways consolidation, which heightens the risk for a hard retest of the bear market bottom set back in November. It should be noted that there is very little convincing support below 440; so sustained action below that point would clear the way for a run down to the next big support level at 416. If the Russell can stage an afternoon bounce, resistance is at 450 and 453.50.
Looking at today’s sector activity, financial and bank stocks were once again getting drummed and tech stocks were struggling in the wake of Microsoft Corp. (Nasdaq:MSFT) posting disappointing quarterly results ahead of schedule earlier this morning. Elsewhere on the S&P groups, insurance stocks, construction firms, motorcycle manufacturers and real estate investment trusts were attracting heavy selling interest. The only spots of strength were health-care providers, health-care facilities and retail drug stocks. Even in a bad economy, people need drugs and health care.
The market was able to meander along this week focused primarily on earnings reports, but today ushered in the first meaningful economic data of the week and the news wasn’t pretty. Housing starts crumbled to record lows and unemployment claims rose much higher than expected, all of which raises the specter of a prolonged recession and a potential retest of the lows.
Individual small caps making a move today included Brinker International Inc. (NYSE:EAT), which soared 32% after topping the profit forecast as the operator of On the Border and Maggiano’s completed the sale of its Macaroni Grill franchise. On the downside, GTx Inc. (Nasdaq:GTXI) tumbled 37% on news that a breast cancer drug distributed by the firm should not be used in patients with a heart condition.
