Morning slide extended
Small-cap stocks extended the morning slide into midday trading, with financial, tech and homebuilder shares overpowering gains in energy and commodity names. Analyst downgrades for key companies in the financial and technology arenas played a role in magnifying worries about consumer spending and the never-ending credit crisis. At 12:21 p.m. ET, the Russell 2000 (NYSE:IWM) was down 11.08, or 2.36% at 457.35.
On the banking/financial front, analysts downgraded JP Morgan Chase and Co. (NYSE:JPM) and the firm was one of the major drags on large-cap indices, sinking some 6.8% and spreading selling in financial firms throughout the market. Analysts also downgraded Apple Inc. (Nasdaq:AAPL), which tumbled nearly 4% and sparked a slide throughout the technology arena. The tech-laden Nasdaq 100 was down 2.2% at mid-session, about double the percentage losses seen in the S&P 500 and Dow.
The Treasury Department announced it was reviewing information from the auto industry and providing regular updates to the White House, which kept enthusiasm for some kind of bailout for U.S. automakers running high. Even though the overall market was falling today, shares in General Motors Corp. (NYSE:GM) were up 5.5%, while Ford Motor Co. (NYSE:F) was up 3.6%.
Looking at sector activity so far today, commodity themes dominated the top gainers. Gold, coal, metals and mining, oil equipment, fertilizer and oil drillers were at the top of the heap. Commodities were underpinned today by a big decline in the U.S. dollar, which was off some 2.1% against the euro. There was some thought that “hot money” overseas investors that were aggressively loading up on U.S. assets in October and November were now unloading them, adding to the bearish tone for the dollar and for equities. A report released earlier today showed that record capital inflows came into U.S. securities in October, but that they appeared to be short-term type of flows.
Individual small-caps on the move today included Methode Electronics Inc (NYSE:MEI), which fell 16%, basically reversing a huge rally .from Friday’s session. Brookfield Homes Corp. (NYSE:BHS) slipped 15% as homebuilders were taking a beating today. Developers Diversified Realty Corp. (NYSE:DDR) sank 15% as the shopping center real estate manager said that a deal to sell 13 assets would not close in December as hoped. Rofin Sinar Technologies Inc. (Nasdaq:RSTI) fell 14% as the laser-beam manufacturer updated guidance lower, saying first quarter sales would be at $120 million instead of $125 million. On the upside, Ticketmaster Entertainment Inc. (Nasdaq:TKTM) rose 17% and continues to grind higher after sinking to move lows in late November.
Crude oil prices rose more than $3 dollars a barrel today, climbing back above $50 and providing a boost to energy stocks, which were up about 1.2% into midday trading. The market is bracing for OPEC leaders to announce additional production cuts at a meeting later this week. Gold prices were also climbing today, up some 2.2%, getting a lift not only from the slide in the greenback, but also from some flight-to-quality buying as equities were down and Treasury markets were up.
The Russell pushed through support at 461, leaving the next support test at 452.50. Below there, look for support approaching 442. If the market can mount a recovery move this afternoon, then resistance is at 473.
