Pending home sales, Fed news help lift small caps to flat zone
Small-cap stocks opened higher, but stalled quickly as bargain hunters were on the buy side trying to balance a mixed bag of corporate profit reports, worries about the stimulus package progress and valuation levels on the indices that have are seen as attractive in many corners. At 10:04 a.m. ET, the Russell 2000 (NYSE:IWM) was down 1.62, or 0.36%, at 447.99.
The pending home sales report rose 6.3%, which was better than expected (the forecast was flat) and helped spark a little recovery bounce in equities. At the same time that the pending home sales report came out, the Federal Reserve said that they would extend liquidity provisions for various lending programs, which also was a supportive element in play. Treasury markets clearly extended morning declines after the pending home sales report, which suggests money flow out of debt markets and potentially into stocks.
Traders also will be watching vehicle sales report out of the major automakers throughout the session, for a glimpse not only of how bad things are on the car front, but also on the overall consumer spending psyche.
Lawmakers are slated to start debate today on the Obama stimulus plan, one that went through the House without any Republican support, but which faces a sterner test in the Senate without getting some Republican converts.
Individual small caps on the move this morning included InterMune Inc. (Nasdaq:ITMN), which gapped higher and jumped 31% as the firm’s lung drug met its trial goal. Sonesta International Hotels Corp. (Nasdaq:SNSTA) jumped 30%, but volume on the move was limited. John B. Sanfilippo & Son Inc. (Nasdaq:JBSS) rose 26% as the nut snack maker got an earnings-related lift. Transdigm Group Inc. (NYSE:TDG) rallied nearly 13% as the aircraft component designer was another firm reporting solid results. On the downside, The Pantry Inc. (Nasdaq:PTRY) fell 13% as the convenience chain store operator was on the negative side of the earnings response.
Looking at the chart picture for today, small caps will be testing that key zone around 450 right off the bat. A decisive push back above that point would see resistance along 453.50, then at 459 and 462. Meanwhile, support is pegged at 445.50, then at 439.50.
