Jobs Report Boosts Small Caps 3% today
Small caps are up nearly 3% this afternoon after the government reported this morning that fewer jobs were lost in April than expected.
At 2:06 pm ET, the Russell 2000 (NYSE:IWM) is up 2.81% at 506.81, while the Dow is up 1.56% and the S&P 500 is up 1.85%.
Employers cut 539,000 jobs last month. That is a big improvement from a revised 699,000 job losses in March and less than the loss of 610,000 jobs analysts had been expecting. Also, the federal government reported that 10 of the 19 largest U.S. banks must raise about $75 billion in new capital, which is less than some had feared.
Small caps on the rise today include MedQuist Inc. (Nasdaq:MEDQ), up 64% after announcing first-quarter 2009 results, and Huntington Bancshares Inc. (Nasdaq:HBAN), 36% higher after completing a $120 million stock issue. Fuel Systems Solutions (Nasdaq:FSYS) is also up 40% today after posting a Q1 net profit, while VNUS Medical Technologies (Nasdaq:VNUS) has popped 35% after news broke that Covidien Ltd. will be acquiring the small cap.
*****The headline reads “Bank Stress Tests Lifts Clouds of Uncertainty.” And bank stocks are rallying. Regional bank Fifth Third Bancorp (Nasdaq:FITB) is up 40% in the early going on the news that it needs to raise $1.1 billion.
In total, the government’s stress tests recommended that banks raise $75 billion to withstand further potential losses. I’m not sure how to reconcile the stress tests results with the IMF report on bank losses that was released in April.
In that report, the IMF said that total losses for banks and financial institutions would hit $4 trillion. The U.S. share of that is $1.6 trillion, of which $510 billion has already been written off. That leaves another $550 billion in write-offs to come.
Clearly, somebody’s got their numbers wrong.
*****TradeMaster Daily Stock Alerts members took a nice 22% gain on solar stock Solarfun (Nasdaq:SOLF) in four days this week. Despite the upside we’re seeing today, TradeMaster technical analyst Jason Cimpl thinks the rally may be nearing an end. From today’s morning missive:
“Yesterday was a significant bearish day. Everyone should take note of what occurred yesterday in the Nasdaq, which could signal the beginning of the end (we changed our intermediate forecast). We will get a video to [members] today reviewing the market, but specifically the Nasdaq. We think that the market has higher to move, but this run could be over by June.
Yesterday, the Nasdaq broke a multi-month support line in decent volume. This is a sell signal. Let's repeat that statement so we are all clear: this is a major sell signal.”
*****I’m hoping this rally can hold out until June as Jason suggests. Have you seen Graham Corp. (AMEX:GHM) today? It’s up 19% to $13.85.
After recommending that you sell out of Hovnanian (NYSE:HOV) right before it ran higher, I vowed not to make the same mistake with Graham. And it looks like that resolve is paying off. Graham is up around 50% from my original recommendation.
*****Business inventories took another plunge in March, falling by 1.6%. Businesses are scaling back inventory due to the weak economy. But economists say the aggressiveness with which businesses have cut inventory is a positive. When demand returns, inventories will have to be built up as quickly as they were cut. That, in turn, will lead to a quicker increase in production and hiring.
But the first step is to see job cuts slow, and that’s exactly what happened In April. The Labor Department said 539,000 jobs were lost last month. That’s the lowest number in six months, and significantly lower than the 620,000 job cuts analysts were expecting.
The unemployment rate moved higher to 8.9%. That’s very close to what some expect will be the peak for unemployment in this recession. Maybe, just maybe, the economy really is stabilizing.
