Small caps hover near steady levels; FOMC “breather”
Small-cap stocks edged into positive ground into midday trading on support from commodity names, but in general the market appeared to be in a “breather” mood after Tuesday’s manic upside push when Federal Reserve policy makers surprised the market with aggressive interest rate cuts. At 12:20 p.m. ET, the Russell 2000 (NYSE:IWM) was up 0.03, or 0.01%, at 482.87.
In addition to the natural pause in bullish enthusiasm after such a memorable rally Tuesday, today’s profit reports were lackluster at best and pretty much anything tied to homes, homebuilders, home furnishings or real estate was struggling. Real estate investment trusts (REITS) were among the poorest performers so far today, as were houseware and home furnishing stocks. Companies such as Newell Rubbermaid Inc. (NYSE:NWL) and Leggett & Platt Inc. (NYSE:LEG) were taking a hit, down 28% and 10%, respectively.
Financial stocks were a drag on the market today, with the Financial Select Sector SPDR Fund off about 1.7%. Citigroup Inc. (NYSE:C) was down some 4.7% and Bank of America Corp. (NYSE:BAC) was off about 2.9%.
Crude oil prices held relatively steady despite a hefty 2.2 million barrel a day output cut pushed through by OPEC members. Skepticism about OPEC’s ability to hold the line on production might account for some of the lack of rally response in energy markets, as well as concerns that slumping global demand remains on the radar screen for some time to come. Energy stocks were slightly higher even though crude oil prices were calm; commodity markets in general likely found underlying support from yet another dramatic slide in the U.S. dollar, which was down 2.2% against the euro and off 1.3% against the yen, setting 13-year lows against the latter currency.
Looking at individual S&P sectors, the top performers included health care facilities, coal stocks, commercial printers, railroads, mining and metal stocks and steel companies. Interestingly, the saga of a bailout package to automakers seems to have simmered down a tad amid all the FOMC hoopla, but Tuesday afternoon Treasury Secretary Henry Paulson said that automakers would get funds as quickly as prudently possible and General Motors Corp. (NYSE:GM) stock was up a mild 1.4% into mid-session trading, while Ford Motor Co. (NYSE:F) was up just a tad, about 0.3%.
Individual small caps of note so far today included Satyam Computer Services Ltd. (NYSE:SAY), which made international news Tuesday when the firm’s founder and chairman said he would spend $1.6 billion to purchase infrastructure companies owned by his sons. Shareholders revolted against SAY on the news and their stock plunged 55%, which prompted Satyam’s chairman to back away from the deals overnight. Investors clearly embraced that news, with SAY gapping higher and gaining back 41%. A day doesn’t go by lately that a marine drybulk firm isn’t ranked as on the top percentage movers and today’s attention goes to Safe Bulkers Inc. (NYSE:SB) as the Greek shipping firm jumped 25% and is now up 165% from the November lows. Dry bulk firms have been all the rage lately as the Baltic Freight Index has rallied off 22-year lows. Baltic freight rates are a pet economic indicator for some market watchers. VeriFone Inc. (NYSE:PAY) rose 24% as the electronic payment technology firm reported earnings in line with expectations and forecast profits above the projection. On the downside, MWI Veterinary Supply Inc. (Nasdaq:MWIV) tumbled 19% as the distributor of animal health products erased a huge chunk of a recent rally in one fail swoop.
Price action so far today in small caps has been pretty tame, with volume light and trading ranges tight. A light volume pullback off Tuesday’s rally is actually mildly supportive, so long as key support zones aren’t snapped this afternoon. Speaking of support, the next downside point to watch is at 473, then at 461. On the upside, if the market can get rolling again this afternoon the MAJOR spot is still at 491. A convincing push through that point would add some kick to the bottoming argument.
