Mild early rise as firm energy, GM news counter shopping woes
Small-cap stocks pushed higher on the open, bolstered by a mild bounce in energy markets, approval for GM’s finance arm to become a bank holding company and a modest rise in Asian equities. Those supportive elements were countered by a dreary picture on the consumer spending front. At 9:56 a.m. ET, the Russell 2000 (NYSE:IWM) was up 1.82, or 0.39%, at 472.30.
With many European markets closed overnight for the Christmas holiday and with quite a few Americans extending Thursday's break into a four-day weekend, volume in equities could be lethargic today. And next week could be an extension of the tame action, with another Thursday holiday for New Year’s celebrations ahead of the weekend.
MasterCard Advisors said that holiday spending from Nov. 1 through Dec. 24 shapes up as one of the worst holiday seasons in decades, with overall sales down 2% to 4%. With about two-thirds of the U.S. economy driven by spending, the slide in year-end shopping is a stark reflection that consumers are struggling amid rising unemployment and falling home values. Despite plenty of gloom about what appears to be a very sluggish holiday spending environment this year, Amazon.com Inc. (Nasdaq:AMZN) officials said that this holiday season was its “best ever” with the peak day coming on Dec. 15. AMZN shares were up 3.7% shortly after the open. Even with all the retailer worries abounding right now, it’s interesting to see that Wal-Mart Stores Inc. (NYSE:WMT) has been the best performing Dow stock this year.
General Motors Corp. (NYSE:GM) was up 10% this morning, lifted by news that the automakers financing arm, GMAC LLC was granted approval by the Federal Reserve to be converted to a bank holding company. That status would allow GM access to discount lending windows, likely further helping the firm avoid bankruptcy proceedings. GM has been the worst performing Dow stock so far in 2008. Ford Motor Co. (NYSE:F) also seemed to benefit from the news, rising 8%.
Crude oil prices were on the rise this morning, up about $0.50 a barrel on the U.S. stock market open following news that United Arab Emirates would cut output to comply with OPEC reductions. Despite production reduction plans, crude oil prices have been sinking fast in recent days amid concern about recession from top customers like the United States, Japan and the United Kingdom and a slowdown in growth from China. A recovery in crude oil prices would be a welcome sign for emerging market countries with oil production – especially Russia – which ranks as the second-largest crude oil producer. Russia had to devalue the ruble currency again this week, and the slide in energy prices threatens to spark budget funding issues and even civil unrest in the country. Energy stocks were leading the way early today, rising about 1.1%.
Individual small caps on the move this morning included Bel Fuse Inc. (Nasdaq:BELFB), as the electronic component maker gapped higher on very thin volume as the stock continues to climb off the Nov. 21 bottom, and has nearly doubled in value from that low. Rush Enterprises Inc. (Nasdaq:RUSHB) rallied 10% as the heavy duty truck retailer also gapped up on thin turnover. On the downside, Shoe Carnival Inc. (Nasdasq:SCVL) fell 6% without any apparent fresh news. Credo Petroleum Corp. (Nasdaq:CRED) was also down 6% on light volume.
From a technical analysis perspective, days like Wednesday, today and probably all next week become something of a difficult target because light volume takes the edge off price movement. What’s more, Wednesday’s session saw light volume and a tiny price range. For the most part, action within this sideways consolidation range is a positive development, breaking away from the previous pattern of massive collapses and short-lived bounce failures. As the day progresses, look for resistance near 479, 484 and 491. If the market starts to wobble, then support is at 461 and 452.50.
