Russell 2000 turns around
The Russell 2000 (NYSE: IWM) has rebounded from its earlier losses despite news of poor economic reports.
At 12:28 p.m. ET, the small-cap index was up 3.92 points, or 0.56%, to 706.26. The Dow Jones Industrial Average (INDU) was up 20.59 points, or 0.17%, to 12,357.81.
Stocks small and large opened with a drop as investors focused on news of surprisingly strong inflation and largely disregarded expected news that the U.S. housing sector remains troubled.
The Russell 2000 fell to a level below 696 points shortly after 10 a.m. ET, and stayed in the red until a sharp jump at about 12:10 p.m. ET propelled it into positive territory.
Wall Street’s bearish mood in the morning was due to news that the consumer price index added 0.4% in January, above the expected 0.3%.
The U.S. Labor Department also reported that core consumer prices, which exclude the costs of food and energy, increased 0.3%, above the projected 0.2%.
Core prices have added 2.5% on a year-over-year basis, which is beyond the U.S. Federal Reserve’s preferred range of between 1% and 2%. Worse, annual consumer prices growth has accelerated from 2.4% in December 2007.
The jump in inflation makes it more difficult for the Fed to continue lowering interest rates to boost economic growth.
In other economic news, the U.S. Census Bureau reported before the opening that housing starts rose 0.8% in January, while building permits, an indicator of future construction, fell 3%.
Among the small-cap stocks that are dropping is Noah Education Holdings Ltd. (NYSE: NED), a Chinese maker of multimedia learning materials. The company announced a rise in fiscal second-quarter income but lowered its revenue forecast for the fiscal year 2008.
Shares of XTENT, Inc. (Nasdaq: XTNT) are also declining on news that the Menlo Park, Calif.-based maker of medical devices widened its fourth-quarter net loss.
Elsewhere, an analyst reduced his target price for shares of Switch & Data Facilities Company, Inc. (Nasdaq: SDXC).
