Russell 2000 up 2%
Small-cap stocks extended the morning rally into mid-session, with battered bank and financial stocks leading the way amid hope for a bank bailout plan to be rolled out early next week. At 12:36 p.m. ET, the Russell 2000 (NYSE:IWM) was up 9.21, or 2.02% at 464.29.
Looking at S&P group activity so far today, the best performers were regional banks, homebuilders, diversified banks, diverse financial services firms, auto parts companies and broadcasters. On the banking front, the KBW Banking Index jumped 9.4%, with Bank of America Corp. (NYSE:BAC) soaring 22% after getting a “buy” recommendation from analysts, and also being swept up in the bailout euphoria today.
In an interesting twist, the market decided to embrace today’s “bad” news on the employment picture as a “good” news event for the market. The argument has already been made many months ago that economic data will lag the actual market bottom and today’s sobering glimpse of a receding labor market was interpreted as just another cattle prod that can be applied to lawmakers to get things rolling on both a bank bailout and on a fiscal stimulus package.
For the record, the Labor Department said that a jolting 598,000 Americans lost their jobs in January, the largest one-month decline in 34 years. In addition, the unemployment rate climbed to 7.6%, the highest level in more than 16 years. Canada also saw the worst job loss today in more than a generation, but it hasn’t stopped their stock market from gaining 2% so far today, either.
While a majority of the market was in rally mode today, there were pockets of weakness. The worst performing S&P groups were insurance firms, forest product companies, education services, oil refiners, oil and gas drillers, and oil exploration companies.
Energy shares moved into positive territory by midday, but were lagging the overall market as crude oil futures were off some 4% back below $40 dollars a barrel amid concerns about demand and on commodity “rolls” tied to positions being moved into later maturity contracts. Even though energy markets were soft today, other commodities were doing quite well, with corn, soybeans, cattle and cocoa all on the rise. The latter market pushed to a 5-month high, in fact.
Individual small-caps on the rise at midday were highlighted by bank and financial firms. Stepping away from those stocks, Skyworks Solutions Inc. (Nasdaq:SWKS) jumped 27% as the seminconductor firm posted earnings that investors embraced. Atlas Air Worldwide Holdings (Nasdaq:AAWW) rose 18% as the air cargo firm updated guidance. On the downside, SKECHERS USA Inc. (NYSE:SKX) tumbled 27% as the shoe maker cautioned about the 2009 outlook and forecast a surprise fourth-quarter loss.
The chart picture for the Russell shows that the market is still trapped within the confines of a smaller range, and even that range is well defined in the larger elongated consolidation formation. The next key test for the Russell is at 466, then at 474; a breach of the latter would suggest an upside breakout through the mini-range and a possible run toward 500. On the downside, if the market starts to falter this afternoon, then support is at 454, 449.50 and 445.50.
