Rout swells as economy still suffering
Small-cap stocks extended the morning slide into midday trading, as a fresh run of economic data this morning suggested that the economic recession is darkening. Selling interest was heightened by a bevy of awful corporate profit reports, shuffling the previous four days of rallies into the background. At 12:22 p.m. ET, the Russell 2000 (NYSE:IWM) was down 11.89, or 2.51%, at 461.13.
This morning’s weekly claims report showed that more Americans are now drawing unemployment insurance than at any point in history. Everyone is expecting the jobs picture to get worse, but with companies announcing layoffs on a daily basis and with other economic data looking equally gloomy, investors are struggling to cast aside the weak reports right now.
In other economic releases today, orders for durable goods fell more than expected and have now been down for five consecutive months. New home sales tumbled to the lowest rate since the data series began 41 years, sinking 14.7% to an annual rate of 331,000, which was shockingly below the forecast of 400,000.
As you might expect given dreadful home sales numbers and historically high unemployment rolls, homebuilder stocks were getting bruised today, with the ISE Homebuilders Index down 5.7% and small-cap builders Centex Corp. (NYSE:CTX) off 5% and Meritage Homes Corp. (NYSE:MTH) down 12%.
Looking at sector activity today, the market was swamped with selling breadth. Gold shares were mildly higher, but just barely, with the Gold and Silver Index rising about 2%. Energy shares fell 2.4% as the crude oil market saw the weak economic data and fretted anew about demand destruction in a global recession. Industrial real estate investment trusts were getting knocked today, as were real estate services companies, household appliance companies, broadcasting firms and building products companies.
Stocks taking a hit today included Inter Parfums Inc. (Nadaq:IPAR), as the cosmetics firm tumbled 23%, wiping out solid recent gains in the process. SurModics Inc. (Nasdaq:SRDX) gapped lower and shed nearly 20% as the medical products company took an earnings related hit. Online futures and options broker optionsXpress Holdings Inc. (Nasdaq:OXPS) fell 14% after reporting earnings.
The chart picture took a sudden turn for the worse today, unable to sustain Wednesday’s breakout through the recent trading range highs defined by the inauguration day peak. The market stalled near the 20-day moving average and remains in a sideways consolidation, unable to build much in the way of staying power in either direction. As we move into afternoon trading, look for support for the Russell at 454 and 449, while resistance is at 466 and 474.
