New lows as consumer confidence plunges to historic lows
Small-cap stocks turned lower by mid-morning, unable to sustain the opening drive higher against bearish headwinds stirred by glum consumer confidence readings. At 12:35 p.m. ET, the Russell 2000 (NYSE:IWM) was down 3.35, or 0.75%, at 445.05 as the market slipped to fresh five-year-plus lows once again today.
As we’ve seen in recent weeks, small caps were bruised relative to large-cap products, with the Dow and S&P 500 still in positive territory despite the stunning downturn on consumer confidence readings. The Conference Board’s monthly consumer confidence index tumbled to the lowest level since the survey began back in 1967, sinking to 38.0, well below the forecast of 52.
The dive in confidence was enough to stem an early buying tide in small caps and investors continue to move along with a “bigger is better” mentality on equity investments. Still, the dive in confidence clearly had an impact on large caps as well, which were well off the morning highs.
On the opening, a push higher in Asia and Europe overnight sparked enthusiasm for equities, a sentiment furthered along by a dip in inter-bank lending rates and a firm tone for technology and energy shares. The Energy Select Sector SPDR Fund was up nearly 5% at mid-session, providing a significant upside element for large caps that spilled into small caps on a much smaller degree.
It was interesting to see that the Russell stalled this morning just shy of logical short-term resistance at 462 instead of jumping above that point on the open. If the market can mount an afternoon rally through 462, then the next resistance points of note are at 474 and 481. On the downside, persistent price action below 450 is truly troubling and there are no noteworthy support points until the Russell gets closer to 430, which represents an approximate 50% recession-era pullback from record highs (consistent with other recession declines in equities).
Individual small caps of note this morning included Parexel International Corp. (Nasdaq:PRXL), which was down 45% following soft earnings results. Meritage Homes Corp. (NYSE:MTH) was off 37%, sinking to the lowest point since January. AmeriCredit Corp. (NYSE:ACF) was down 32% as the company cautioned on debt load issues while reporting earnings.
