Russell 2000 remains strong
The Russell 2000 (NYSE: IWM) is posting solid gains while the Dow is flat on news of generally bearish economic data and a bid for Yahoo!. At 1:15 p.m. ET, the small-cap index had advanced 6.44 points, or 0.90%, to 719.74. The Dow Jones Industrial Average (INDU) was up 16.09 points, or 0.13%, to 12,666.45.
Small-cap stocks have eased from their spectacular early-session gains but are still posting solid increases as investors focus on news that Microsoft Corp. (Nasdaq: MSFT) made an unsolicited $44.6 billion bid for Yahoo! Inc. (Nasdaq: YHOO) and disregard mixed economic reports.
The bulls are in control today on news that Yahoo! has received an unsolicited bid from Microsoft to sell itself for $31 per share.
The price is 62% above the stock’s closing level on Thursday and serves as a testament of the software maker’s intense desire to expand its online advertising business and challenge the dominance of Google Inc. (Nasdaq: GOOG).
Meanwhile, the economic data released this morning confirm that a slowdown is at hand as the housing sector continues to stagnate.
The U.S. Labor Department announced before the start of trading that payrolls unexpectedly fell 17,000 in January, while the figure for December was revised up by 64,000 jobs. The overall unemployment rate slipped to 4.9% from 5%.
Employment is a lagging indicator and the January decline, the first since August 2003, is another sign that economic growth slowed in the final months of 2007. On Wednesday, the U.S. Commerce Department reported that gross domestic product added just 0.6% in the fourth-quarter of 2007.
More bearish economic news came after the start of trading, when the U.S. Census Bureau said that construction spending contracted a more-than-expected 1.1% in December, led by a 2.7% decline in residential construction.
That tells us that the slump in the housing sector continues. Residential construction is down 20.1% from its level a year earlier.
The small-cap index, which had climbed more than 2% and nearly touched a level of 730 points during its morning peak at around 10:10 a.m. ET, quickly lost steam and trimmed those gains. The Dow briefly entered negative territory.
Meanwhile, the Institute for Supply Management surprised economists when it reported that its index of factory activity rose to 50.7 in January from 48.4 in December. A reading above 50 indicates growth.
