Recovery bounce led by techs, energy, gold
Small-cap stocks rallied back into positive territory, rejecting a morning slide to seven-week lows as technology firms, energy companies, gold stocks and downtrodden financial shares attracted buying interest from bargain hunters. The Russell 2000 (NYSE:IWM) closed up 1.51, or 0.34%, at 444.36. Despite the rally off morning lows, this still marked the lowest weekly close for small caps since the bottom was formed in mid-November and was the second lowest weekly finish in more than five years. For 2009, the Russell is off 11%, while the Dow is down 7.9% and the S&P 500 is down 7.8%.
Technology stocks were a clear source of strength for the market today, with Google Inc. (Nasdaq:GOOG) climbing 5.9% after reporting solid earnings. Earlier this week, Apple Inc. (Nasdaq:AAPL) beat the forecast and these good vibes on select tech stocks have helped offset terrible reports from Microsoft and from a handful of chipmakers around the world (such as Samsung and Advanced Micro Devices).
It has been a bruising run for bank and financial shares in recent weeks, but that group found buyers today, perhaps linked to bargain hunting and also likely supported by hopes for a stimulus-tied jump next week as more details about the Obama plans come to light. In addition, the market is starting to expect embattled Treasury Department appointee Timothy Geithner will clear a Senate vote on Monday, providing some leadership in the financial arena. Geithner today said that he would strengthen regulation on over-the-counter derivatives and oversight of hedge funds. For the day, bank stocks were up 4.1%, while the Financial Select Sector SPDR Fund rose 3.3%.
Gold prices steamrolled to $900 an ounce Friday, gathering momentum from short-term investors seeking a safe-haven and perhaps even some long-term traders hoping for inflation to rise again down the road when all the economic stimulus plans kick into gear. The Gold and Silver index jumped 9.2%. Small-cap gold miner Golden Star Resources Ltd. (AMEX:GSS) climbed 8.1% and fellow small-capper Novagold Resources Inc. (AMEX:NG) rallied 17.8%. Elsewhere on the metals front, copper prices stormed 6% higher Friday, which is a good sign about the global economy if the move could somehow gain traction; as it stands, the bounce in copper simply looks like an oversold move off long-term lows at this stage.
Energy stocks were among the strongest performers today, bolstered by a recovery rally in crude oil prices, which jumped 6.4%, or $2.80 a barrel to $46.47. Energy markets were underpinned by a cold sweep moving back into the U.S. Northeast and also by the bounce off the morning lows in equities. The Energy Select Sector SPDR Fund was up 2.9%.
Even though gains in tech stocks, financials and gold shares helped saved the day from a scary morning slide to fresh move lows, there were still plenty of areas out there struggling. The S&P groups posting the largest declines today were industrial conglomerates, motorcycle manufacturers, office electronics firms, personal products companies, photo products firms and insurance brokers.
Individual small caps on the move Friday included Geron Corp. (Nasdaq:GERN), which jumped 40% on unusually heavy volume on news that the FDA approved the first tests in human patients of embryonic stem cells. Tempur-Pedic International Inc. (NYSE:TPX) rose 24% as the mattress maker beat the earnings forecast just a week after rival Sealy Corp. posted a stunning loss. Canadian Solar Inc. (Nasdaq:CSIQ) climbed 17%, reversing a morning slide to seven-week lows.
Coming into today’s action, overseas markets were in retreat mode, with the Europe Stoxx 600 sinking to five-year lows and the Australia market also at a five-year trough. The pullback in markets around the world seemed to suggest that the U.S. market might need a hard test of the November lows, especially with the banking sector in full blown crisis mode.
Looking ahead to next week’s action, the economic calendar kicks back into high gear after a quiet go this week. In addition to GDP data and several reports on housing, the FOMC leaders will meet mid-week and their comments on the economy and rate policy could be intriguing, even with the Fed funds rate basically at zero. This week served up a harsh reminder that even though terrible economic data is not a surprise, it can set the market back when the numbers are worse than forecast.
