Russell 2000 higher on retail sales
The bulls ran the show today as the Russell 2000 (NYSE: IWM) and the Dow Jones Industrial Average (INDU) posted solid gains on news of strong September U.S. retail sales. The small-cap index added 6.19 points, or 0.74%, to 841.17. The Dow advanced 77.96 points, or 0.56%, to 14,093.08.
The bears were hibernating today as investors reacted to news that retail sales for September increased 0.6% to $380.2 billion, according to the U.S. Census Bureau before the opening. That surprised economists, who were expecting a rise of 0.2%.
Retail sales excluding motor vehicles and parts also outpaced analysts’ projections, rising 0.4% instead of the expected 0.3%.
The numbers suggest that the American consumer remains resilient in the face of the ongoing housing slump.
However, Kurt Karl, head of Economic Research and Consulting for the North American operations of reinsurance company Swiss Re, cautioned against an overly optimistic interpretation of the data.
“Total retail sales were strong, but excluding autos, they were up 0.4—compensating for last month’s decline of 0.4%,” Karl said in an e-mail. “Compared to a year ago, retail sales after-inflation are close to 2%, which is weak, but not disastrous.”
Karl explained that the weakness stems from stagnant sales of furniture and building materials, which have been affected by the problems in the housing sector.
In other economic news, a measure of consumer sentiment for October unexpectedly fell, indicating that consumers are cautious about their future spending.
The Reuters/University of Michigan consumer sentiment index declined to a reading of 82 from September’s level of 83.4. Observers were expecting to see a reading of 84.
“Confidence fell because the economy is weak,” Karl said. “Businesses also may be getting more cautious and this affects consumer sentiment.”
But the bulls were apparently not much affected. Big and small-cap stocks jumped out of the gate and spent the entire session well above the flat line.
Elsewhere, the U.S. Labor Department reported that producer prices for September outpaced projections and increased the most since February. However, prices for goods excluding foods and energy, a key measure of core inflation, added a tiny 0.1%, less than expected.
That reduces the likelihood of a cut in the target interest rate when the U.S. Federal Reserve meets next on Oct. 30 and 31.
Here are the day’s biggest percentage gainers and losers, along with top volume leaders, among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
•Salary.com Inc. (SLRY), up 23% to $15.90.
•Metabolix Inc. (MBLX), up 21% to $27.13.
•Heelys Inc. (HLYS), up 17% to $9.11.
Biggest percentage losers:
•Coldwater Creek Inc. (CWTR), down 28% to $7.82 on news of a forecast for a third-quarter loss.
•City Telecom Ltd. (CTEL), down 15% to $9.10.
•Advanced Battery Technologies Inc. (GBT), down 13% to $6.63.
Volume leaders:
•Coldwater Creek Inc. (CWTR) 26,977,700 shares traded.
•Origin Agritech Ltd. (SEED) 5,422,500 shares traded.
•The Children's Place Retail Stores, Inc. (PLCE) 5,253,300 shares traded.
