Extend rally as commodity stocks back in favor
Small-cap stocks remained solidly higher into mid-session activity, with industrial, commodity and energy stocks paving the way higher after President-elect Obama announced plans for a massive infrastructure project over the weekend. At 12:39 p.m. ET, the Russell 2000 (NYSE:IWM) was up17.63, or 3.82%, at 478.73.
Looking at S&P sector activity, the best performers so far today have been industrial real estate investment trusts, metal and mining companies, automobile manufacturers, aluminum firms, steel companies, engineering and construction companies, coal companies, farm construction and machinery and specialized finance. As you can see, it’s easy to tie many of those sectors into beneficiaries of a wave of infrastructure projects.
On the downside, personal products firms, hypermarkets, food distributors, retail drug companies and restaurants were the primary losing sectors so far today.
On the big-cap side of the ledger, heavy equipment manufacturer Caterpillar Inc. (NYSE:CAT) soared 13% as investors priced in the potential benefits of the Obama infrastructure push.
Commodities in general were in favor today, with crude oil prices climbing 7%, while energy stocks were up more than 4%. OPEC leaders were talking about additional production cuts to trim supply amid soft demand and a weak tone in the U.S. dollar against the euro also provided a boost to commodities.
Individual small caps on the rise today included Integrated Electrical Services Inc. (Nasdaq:IESC), which jumped 34% presumably riding the wave of industrial and energy-related services companies higher. TBS International Ltd. (Nasdaq:TBSI), jumped 30% as the ocean transportation services company got an earnings-related lift. James River Coal Co. (Nasdaq:JRCC) rallied 26%, receiving a lift with other beaten-down commodity names.
Automakers were rising fast today amid a proposed $15 billion bailout. Over the weekend, Obama said that bankruptcy for the Big 3 was “not an option.” General Motors Corp. (NYSE:GM) was up 16%, while Ford Motor Co. (NYSE:F) was up 17%.
The chart picture for small caps has improved dramatically in recent days and today’s rise through the Black Friday range peak at 473 has been an important show of strength. Persistent action above 473 today would leave 491 as the next key upside testing point. There might be some mild resistance today around 484, but it’s simply a weigh station toward 491. On the downside, any slide back below 473 would be troubling, especially if the market were to close lower on the day.
