Earnings bright spots vs. gloomy consumer confidence
Small-cap stocks remained higher into mid-session, underpinned by a few bright spots on the earnings front, M&A enthusiasm and confirmation of Timothy Geithner’s appointment as Treasury Department Secretary. However, record low consumer confidence kept some buyers at bay. At 12:22 p.m. ET, the Russell 2000 (NYSE:IWM) was up 6.45, or 1.43%, at 456.39.
The consumer confidence report came in this morning at 37.7, which was below the forecast of 39 and at record lows as consumers fret about sinking house prices and rising unemployment. Speaking of house prices, the Case-Shiller Home Price Index tumbled 18.2% from year-ago levels, which clouded some of the optimism from Monday’s more upbeat existing home sales data.
As for big-cap earnings news, American Express, US Steel and Texas Instruments helped offset weak reports from Verizon Communications and DuPont Co. and provided a small sliver of hope that an awful earnings season will still serve up some glimmer of good news.
Looking at sector activity so far today, coal stocks, steel companies, health-care distributors, diversified banks, motorcycle manufacturers, industrial conglomerates, advertising agencies, office electronics and semiconductor firms were the top performers. On the downside, airlines, oil refiners, electrical equipment manufacturers, telecoms, internet retailers, home improvement retailers, home furnishing retailers and food distributors were the weakest performers.
Looking at airlines, the AMEX Airline Index was off 6.3%, with small-cap carrier US Airways Group Inc. (NYSE:LCC) down 12%. Meanwhile, UAL Corp. (Nasdaq:UAUA) was off about 8%. The big news on the airline front came from big-cap carrier Delta Air Lines Inc. (NYSE:DAL), as the world’s largest firm tumbled 18% after reporting a hefty quarterly loss.
Among coal stocks, small-cap company Patriot Coal Corp. (NYSE:PCX) was up 2.7%, while Massey Energy Co. (NYSE:MEE) was up 3.2%. Outside of coal, energy shares were actually down a tad, with the Energy Select Sector SPDR Fund off about 0.1% in line with slumping crude oil futures.
Individual small caps climbing on decent volume so far today are highlighted by CV Therapeutics Inc. (Nasdaq:CVTX), which soared 42% on huge volume on news that a Japanese firm tendered a $1 billion bid for the biotech company. Resource America Inc. (Nasdaq:REXI) was only slightly higher at midday, but was seeing unusually brisk volume, especially for such a tight daily range. Netflix Inc. (Nasdaq:NFLX) jumped 14% on heavy volume following surprisingly positive earnings figures. On the downside, LivePerson Inc. (Nasdaq:LPSN) was off about 2.6% on a jump in turnover without any apparent fresh news. Olin Corp. (NYSE:OLN) fell 12% on brisk volume tied to earnings news.
Looking at today’s chart picture, the Russell so far is trapped on an inside session bounce within Monday’s ranges and the volume is tepid, which means the rise lacks power. An afternoon push through Monday’s high of 458.81 would help provide a little more legitimacy for today’s upside price action. Beyond that point, resistance is at 461 and 466. On the downside, if the market starts to wobble, support is at 450, then at 444 and 439.
