Bank hope fades, small caps back in the red
Small-cap stocks turned lower into midday trading, as hopes for a recovery in bank stocks appeared to be fleeting, which added to investor unease about the timing of a recovery out of the recession and about the prolonged credit crunch. At 12:16 p.m. ET, the Russell 2000 (NYSE:IWM) was down 6.14, or 1.33%, at 456.49.
The spotlight this week has been shining brightly on bank stocks, but they have retreated badly from that glare as some of the big-name banks have reported massive quarterly losses. Even an infusion of another $20 billion into No. 1 bank, Bank of America Corp. (NYSE:BAC), wasn’t enough to rescue the day, as BAC shares not only gave up sizable morning gains, but were off some 10% at mid-session. Meanwhile, Citigroup Inc. (NYSE:C) reported jolting quarterly losses of some $8.2 billion and also gave back morning gains to be near steady at midday.
Looking at S&P sector activity, the worst performers were clearly coming out of the financial arena and included diversified banks, diverse financial services firms, regional banks, investment banks and consumer finance companies. Other groups struggling included auto parts firms, motorcycle manufacturers and automobile manufacturers, which is a switch from overnight trends as those groups did well in Asia and Europe.
Although the weaker stocks were losing more on a percentage basis than the gainers, sectors doing well today including power companies, oil refiners, gas utilities, vintners, utility companies, health care equipment providers and food retail stocks.
Energy shares were modestly higher so far today, crude oil price activity has been choppy so far today, but a blast of arctic air seems to be providing support, even though the rug was pulled out from under equities.
Small cap firms on the rise today included Exterran Partners LP, as the natural gas firm rose 12%, leaving a little double bottom on daily charts with Thursday’s low. On the downside, Exide Technologies (Nasdaq:XIDE) tumbled 21% as the battery maker gave back a huge chunk of a nice rally that coincided closely with the overall market bottom back on Nov. 20. Today’s slide in XIDE shares also took place on heightened volume for the stock. Inter Parfums Inc. (Nasdaq:IPAR) was off 14% as the cosmetics maker was caught in a broad-based sell-off of beauty and cosmetics providers. In fact, the biggest percentage loser so far today was Elizabeth Arden Inc. (Nasdaq:RDEN), down 37% following the firm’s decision to lower guidance today. Big-cap company Estee Lauder Companies Inc. (NYSE:EL) also slashed the outlook and was off 12%.
Today’s inability to sustain the morning rise in small caps was a little jolting because it takes away from the reversal pattern Thursday. Still, it would take a slide back below 450 this afternoon to completely wipe out the bullish pattern as a viable short-term bottom. There is also minor intraday chart support near 453 ahead of 450. Below 450, there isn’t that much convincing support until 439, then 417. If the market can start to recover this afternoon, then resistance comes in at 466.50, then at 473.
