ISM upside surprise provides lift
Small-cap stocks rallied into mid-session trading, lifted by a better reading on the country’s sprawling services sector than feared. Additional support was tied to a private employment survey that also was above the worst end of projections, providing some investor calm ahead of Friday’s big monthly Labor Department release on employment. At 12:07 p.m. ET, the Russell 2000 (NYSE:IWM) was up 5.64, or 1.24%, at 458.53.
The ISM Non-Manufacturing Report came in at 42.9, which was better than the consensus forecast of 39.1 and which marked the second consecutive monthly gain after the index hit a record low of 37.3 in November. This report essentially provides a glimpse of services sector activity, which accounts for some three-fourths of all economic activity in the U.S. It should be noted that although today’s report was better than expected, it still reflects contraction and historically weak conditions.
Ahead of the opening today, the ADP Employment survey pegged a decline in non-farm payrolls of 522,000 and predicted Friday’s Labor Department report would show a drop of 525,000, which is slightly above the forecast of 500,000, but still better than some of the worst-case scenarios.
Looking at sector activity so far today, metals and mining stocks were doing well, as were semiconductors, forest products, investment banks as well as tire and rubber companies. However, insurance firms, packaged foods companies, entertainment firms, breweries and tobacco stocks were on the slide.
Volume today has been fairly light, so it might be interesting to focus on a few small caps that are attracting volume spikes. Tremisis Energy Acquisition Corp. (AMEX:TGY) was up just 0.8% at midday, but generating quite a spike in volume while approaching the highest point since mid-September. Allos Therapeutics Inc. (Nasdaq:ALTH) rose 4.8% on brisk turnover following news Tuesday afternoon that the company plans to submit a new drug application to the FDA in the next few months. On the downside, Sports Properties Acquisition Corp. (AMEX:HMR) was off 0.3% on heavy volume.
In a familiar tune, the Russell is seeing a light volume, tight range advance today, quite similar in scope to gains the previous two sessions. The chart structure is mildly bullish here for short-term and intermediate trends, but remains in a long-term sideways consolidation off the bearish collapse last autumn. For the rest of today’s trading, look for resistance near 459.50, then at 466. Meanwhile, support comes in at 449.50, then at 445.
