Russell 2000 ends in the green
The Russell 2000 (NYSE: IWM) and the Dow moved up today despite news of a smaller-than-expected increase in August retail sales and generally gloomy reports about the U.S. economy. The small-cap index climbed 3.14 points, or 0.40%, to 783.49. The Dow Jones Industrial Average (INDU) closed up 17.64 points, or 0.13%, to 13,442.52.
This week the small-cap Russell 2000 rose four out of five days, gaining 7.7 points, or 0.99%. The Dow added 329.14 points, or 2.5%.
Stocks began the day lower following news that August retail sales posted a smaller-than-expected increase of 0.3%, according to the U.S. Census Bureau.
Total retail sales rose 0.3%, following an upwardly revised increase of 0.5% in July. The increase was below the projected rise of 0.4% and was largely attributed to strong automobile sales.
Sales of motor vehicles and automotive parts jumped 2.8% to $77.1 billion, compared with $75 billion in July.
Excluding autos, retail sales tumbled 0.4% to $300.49 billion, compared with $301.56 billion in the previous month. Economists were anticipating an increase 0.2%.
“Consumer spending growth appears to be slowing down,” said Kurt Karl, head of Economic Research and Consulting for the North American operations of reinsurance company Swiss Re, in an email.
“This comes from weaker housing sales—many new homeowners make extra purchases shortly after moving in to their new home—and from increasing economic uncertainty, which is making them more cautious.”
Adding to the cloudy economic picture was news that industrial production growth for August also missed forecasts.
The United States Federal Reserve reported before the opening that industrial production increased 0.2% in August, short of the expected rise of 0.3% and below the upwardly revised gain of 0.5% in July.
The increase was due to 5.3% jump in utilities output, which was the result of unusually warm weather. Worryingly, manufacturing dropped 0.3%, while mining contracted by 0.6%.
“The manufacturing decline is significant,” Karl said. “Economic activity was fairly robust in the second quarter, but is likely to be fairly weak in the current quarter.
“Weak growth and declining inflation will mean at least a 25 basis point cut in rates,” he said.
Stocks began the day in the red, but cautiously moved into positive territory at around 12 p.m. ET.
Helping the reemergence of the bulls was United Technologies Corp. (NYSE: UTX), a Dow component. The Hartford, Conn.-based provider of high-technology products and services for the aerospace industry received a brokerage upgrade.
Equities spent the afternoon near the flat line but finished on top. The final hour of trading saw small-caps start a modest rally that helped the Russell 2000 end the week firmly in positive territory.
