Russell down as financials sink
Small-cap stocks pressed lower on the opening as a fresh batch of earnings failed to impress investors in the aftermath of Monday’s rout on financial stocks and as crude oil drifted up to $135 dollars a barrel. At 10:00 a.m. ET, the Russell 2000 (NYSE:IWM) was off 5.56, or 0.76%, at 731.01.
Regional banks were hammered Monday, with Marshall & Iisley Corp. (NYSE:MI) sinking 5% to 52-week lows on analyst downgrades while Zions Bancorporation (Nasdaq:ZION) also set 52-week lows, losing about 10%. Unfortunately, the news remains gloomy for banks and other financial stocks, with Fifth Third Bancorp (Nasdaq:FITB) shedding 16% shortly after today’s opening. Within the financial arena, large-cap futures and commodities broker MF Global (NYSE:MF) tumbled 22% as the firm said revenues were below the forecast and news that the company will sell convertible securities to raise capital and pay down debt.
The “headline” financial stock coming into today’s action was Morgan Stanley (NYSE:MS), which reported quarterly results that were slightly above the forecast. However, the firm was still pulled into the red, down about 6% in early trading.
Outside of the financial world, FedEx (NYSE:FDX) earnings came in below the forecast, and their outlook for 2009 was dreadfully in line with surging energy costs that are hurting results for the package courier. When the FedEx news came out before the opening, it sparked about a three handle additional decline in large-cap S&P 500 futures.
Speaking of surging energy, crude oil prices climbed back to the $135 dollar a barrel level ahead of the stock market opening on concerns about a potential strike in Nigeria that could crimp output. Crude oil pulled back toward $134 dollars, but should gather direction for the day from the latest stocks data, which will come out at 10:30 a.m. ET.
Broad market sectors on the slide this morning were paced by regional banks, which were off 5%. Automobile manufacturers were down, as were auto parts companies. Investment banks and diversified banks also were attracting sellers. Upside sectors were much less dynamic, but coal, railroad, gold, oil and gas drillers were in the green.
Small caps of note included IPC The Hospitalist Co. Inc. (Nasdaq:IPCM), which was off about 9% after updating its 2008 outlook. The Aristotle Corp. (Nasdaq:ARTL) was down about 9%; the stock has been rife with volatility in recent days. On the upside, Jazz Pharmaceuticals (Nasdaq:JAZZ) were up about 9% without fresh news. Brigham Exploration Co. (Nasdaq:BEXP) was up about 5%, gapping higher on news that the firm announced the first of six wells it plans to drill in Southern Louisiana.
Earlier this morning before the open, the MBA mortgage applications report came in at minus 8.8% and continues to be soft in line with the difficult housing situation and an uptick in rates. The overnight market was already lower before the MBA report and the data certainly didn’t have any supportive element for traders to latch onto. Once the energy stocks report is released, the market will be able to focus solely on supply/demand, breaking news and chart developments, although a midday speech from Federal Reserve official Janet Yellen could stir volatility if she addresses inflation, the economic outlook or monetary policy issues.
