Commodities pace light volume post-holiday rise
Small-cap stocks pushed higher Friday, lifted by a rise in commodity markets, which in turn provided a lift to commodity-themed stocks. Energy markets were a key component on the commodity rise, with crude oil prices up 6.6%, helping offset weakness in financial shares. Volume was extremely light Friday as many market participants took advantage of Thursday’s Christmas holiday to carve out a four-day weekend. The Russell 2000 (NYSE:IWM) closed up 6.28, or 1.34%, at 476.77, and is now down 38% for 2008. The Dow is off 36% for the year, while the S&P 500 is down 41%.
Today’s light volume, limited range affair was remarkably similar to Wednesday’s session, which saw the thinnest one-day range since the whole stock market collapse kicked into gear back in mid-September. On a weekly basis, this was also the tightest range seen in several months.
When looking at sector activity today, commodities were a recurring upside theme, with metals and mining firms, gold stocks, aluminum, oil and gas drillers ranking among the best performing sectors. The U.S. dollar was down modestly against the euro, but this appeared to be more a push for commodity markets than simply a value play based on foreign exchange movement. The Commodity Research Bureau Index was up about 1.3% on the day, with energy, grains and metals leading the way. Gold prices were up 2.7% to a weekly high, and grain markets took flight amid concerns about dry crop conditions in South America, with soybeans at a seven-week peak.
Automakers were a clear source of strength for the market today, with General Motors Corp. (NYSE:GM) climbing 11% on news that their financing arm was approved as a bank holding company by the Federal Reserve, which would allow them access to the Fed’s discount lending windows. The news was embraced by rival Ford Motor Co. (NYSE:F) as well, with Ford shares rising 8%.
Individual small caps on the move Friday were highlighted by Jones Apparel Group Inc. (NYSE:JNY), which gapped higher and soared 39% on pretty good volume considering the overall market malaise. The women’s apparel firm, with brands including Nine West and Jones New York, benefited from news that they consolidated and reduced credit lines. Despite the big rally for JNY, retailer shares were down about 0.2% on the day, with upscale department stores such as Macy’s Inc. (NYSE:M) taking a sizable hit. There was some hope that today would spark a new “Black Friday” consumer shopping spree to help make up for sluggish retail sales this holiday season. MasterCard Advisors cautioned today that holiday sales were off anywhere from 2% to 4%, which would represent one of the worst showings in decades.
Spartech Corp. (NYSE:SEH) jumped 14% as the plastic packaging company rose to the highest daily close since mid-October. Combining the retail and commodities themes, Lumber Liquidators Inc. (NYSE:LL) rose 10% as the specialty hardwood flooring retailer pushes higher off a double bottom on daily charts from Wednesday’s lows. Hansen Medical Inc. (Nasdaq:HNSN) rallied 14% as the medical products specialist tried to recover after slipping to move lows on Wednesday – well after the general market bottomed back in mid-November.
On the downside, even though South American stocks did well today with the commodities rise, Telefonica De Argentina (NYSE:TAR) did not join in on the South American rally, sinking nearly 15% on extremely light volume. Destination Maternity (Nasdaq:DEST) continues to struggle, slipping 12% to fresh 52-week lows today.
From a charting standpoint, this week’s tight range action simply fits with the ongoing sideways consolidation. There may be some concern that this sideways action is starting to take too long for base building while failing key resistance tests, but any patterns that break away from the collapse behavior off the September to mid-November collapse is probably a source of relief.
Looking ahead to next week’s action, it wouldn’t be a surprise to see another light volume week, as the market will have another holiday for the New Year on Thursday, an early close Wednesday ahead of that holiday and then what could be the light volume day in months on the Friday after everyone has their New Year’s celebrations. It is also another light week for economic data, with an early release of weekly claims on Wednesday the probable highlight.
