Russell continues descent on soaring oil prices
Small caps are in a steady downward slide as crude oil prices gushed higher, keeping inflation concerns forefront in investors’ minds. At 2:16 p.m. ET, the Russell 2000 (NYSE:IWM) was down 7.96, or 1.09%, at 724.66.
In recent trading, crude oil futures were up to $136.90 a barrel. The U.S. dollar was down against both the yen and the euro.
“Yesterday, the International Energy Agency or IEA said growth in global oil demand is heading toward a six-year low and may go lower with record prices still filtering through the markets,” Andy Busch, foreign exchange strategist for BMO Capital Markets, wrote in an email. “In its monthly oil-market report, they said they see world oil demand growing 0.9%, or 800,000 barrels a day, this year in a market of 86 million barrels a day. Clearly, the higher price for gasoline and diesel is showing up in several places: less petrol tax revenue in France, less fuel sales for retailers in the U.K. (maybe as much as 20% year over year), and less miles driven in the United States (lowest in March since 1979).”
The surging price of oil has prompted Fed Chairman Ben Bernanke to suggest in recent speeches that the Federal Reserve may raise interest rates to combat inflation.
In acquisition news, Staples Inc. (Nasdaq:SPLS) reportedly finalized a deal to purchase Dutch company Corporate Express; any large-cap M&A activity tends to be embraced by the overall stock market.
The weekly MBA mortgage application index rose 10.9% and the purchase index climbed 12.8% to a four-week high. This data series is volatile and has been on the decline in line with the slumping housing market, but the rise in the latest week was surprising given a lift on interest rates.
Broad sector groups gaining traction in afternoon trading include coal energy, oil and gas operations, gold and silver, oil well services and equipment companies. On the downside, railroad transportation, airline transportation, hotels and motels, trucking transportation, apparel retailers and investment services companies are attracting sellers.
Individual small caps of note this afternoon include Unity Bancorp, Inc. (Nasdaq:UNTY), which is up some 15% despite no announcements. TGC Industries, Inc. (Nasdaq:TGE) is up 17% after presenting at the Energy Capital Investment Symposium in Houston. FirstFed Financial Corp. (NYSE:FED) is plunging 18%, touching near a year low. Central Garden & Pet Co. (Nasdaq:CENT) is falling 36% and Hooker Furniture Corp. (Nasdaq:HOFT) is down 13% on soft quarterly results.
