Russell holding ground waiting for auto rescue news
Small-cap stocks were holding ground into mid-session, buoyed by hope for a White House rescue for automakers and by a bounce in tech stocks, real estate investment trusts, homebuilders and gold stocks, which helped counter ongoing weakness in the financial arena. At 12:32 p.m. ET, the Russell 2000 (NYSE:IWM) was up 4.18, or 0.93%, at 455.39, even though the Dow and S&P 500 were both in negative territory.
On the auto front, the White House appears ready to throw a lifeline to cash-strapped firms via the TARP funds, which have previously been utilized primarily in the banking arena. President-elect Obama also stated that he was disappointed that the Senate shot down a $14 billion bailout bill and the hoped the White House and Congress will find a way to help beleaguered U.S. automakers. As it became apparent some type of emergency bridge loan or funding proposal would more than likely take place quickly, shares in both General Motors Corp. (NYSE:GM) and Ford Motor Co. (NYSE:F) rallied hard off the morning lows. In fact, Ford climbed into positive ground, after sinking some 26% earlier in the day.
The resilient rise in small caps was a welcome sign after stock index futures tumbled 4% overnight when the Senate first squashed the automaker bill. Real estate investment trusts (REITS) were on a serious roll today, with small-capper Prologis (NYSE:PLD) jumping 26%, reversing a big slide from Thursday. Small-cap firm Apartment Investment & Management Co. (NYSE:AIV) was up nearly 7% and Developers Diversified Realty Corp. (NYSE:DDR) jumped 11% -- all of these companies were hammered Thursday and were in correction mode today.
On the homebuilder front, small-cap firm Centex Corp. (NYSE:CTX) rose 4%, KB Home (NYSE:KBH) was up 4% as well and Lennar Corp. (NYSE:LEN) was up 5%. Homebuilder shares were a hot ticket last week when mortgage applications shot to the highest point since February, but they cooled off this week until today’s recovery.
On the downside of things today, railroads, electrical equipment manufacturers, general merchandise stores, coal stocks, metal and mining firms were among the worst performing S&P sectors. Commodities have been carrying the bullish banner most of this week, but were taking a break today. Crude oil prices were off about $3 a barrel into midday trading, up from the lows amid optimism about a potential Treasury bailout for the automakers. Energy stocks were off about 1.6%, along with financials creating the primary drag on equities.
Yields on Treasury products jumped higher, a sign of relief heading into the weekend and with uncertainty still in the picture on the auto front. Higher yields tend to reflect investor demand for safe-haven assets, instead of riskier stock market fare.
Looking at the chart picture for small caps, today’s bounce off the morning lows was a nice sign of strength, but really doesn’t do much to help the chart structure. A rally back above 461 this afternoon would improve the picture, but for now the market has a top-heavy tilt. Look for resistance at the aforementioned 461, then at 473. There is very little noteworthy resistance above 473, so if things were to suddenly get wild on the upside today or Monday, the market could move very rapidly back toward 491. On the downside, support is at 442, 433 and 423.
