Russell 2000 tiptoes higher
The Russell 2000 (NYSE: IWM) and the Dow Jones Industrial Average (INDU) posted gains on a day of rollercoaster stock movement following news of strong earnings and conflicting economic reports. The small-cap index snapped a three-day losing streak, adding 0.64 points, or 0.08%, to 812.50. The Dow added 68.12 points, or 0.50%, to 13,785.07.
The day began on a bullish note as investors reacted to news that Chicago-based aerospace heavyweight Boeing Co. (NYSE: BA) soared to a second-quarter profit of $1.1 billion, compared with a loss a year earlier.
The brief opening rally, during which the Russell 2000 cleared 820 points, lasted only 30 minutes.
That’s because at 10 a.m. ET the National Association of Realtors reported that sales of existing homes fell a more-than-expected 3.8% in June to the lowest level in almost five years.
Americans bought homes at a seasonally adjusted annual rate of 5.75 million units, compared with a downwardly revised pace of 5.98 million in May. The June totals are 11.4% below sales during the same month of 2006.
Economists were calling for a pace of 5.87 million units.
Regionally, the northeast and west led the declines, dropping 7.3% and 6.8%, respectfully.
The silver lining in the report was that housing inventories fell 4.2% while the median home price added a tiny 0.3% on a year-over-year basis.
The small-cap index languished in negative territory, at one time dipping below 805, until shortly after 2 p.m. ET.
The bulls decided it was time for an encore after the U.S. Federal Reserve released its report on regional economic conditions.
The so-called “beige book,” which is published eight times a year two weeks before the Federal Open Market Committee meets to decide on monetary policy, showed that the U.S. economy is growing at a moderate pace in June and early July.
Seven of the Fed’s twelve districts said that growth was modest, with only the Philadelphia district seeing an improvement.
That’s a sign that the economy is on track to expand by about 2.5% in 2007, in line with Chairman’s Bernanke’s forecast.
The beige book also makes it clear that the Fed is not likely to tinker with interest rates any time soon. The federal funds rate currently stands at 5.25%.
