Russell hovering near flat levels
Small-cap stocks were treading water near steady levels, unable to sustain an opening bounce that was tied to short profit-taking from traders who caught the slide yesterday and by decent weekly chain store sales. At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was up 0.19, or 0.03%, at 716.40.
The weekly chain store sales report was up 1.4% versus the same week last year and reflected a solid showing by Wal-Mart (NYSE:WMT) and Costco (Nasdaq:COST), which could provide a lift throughout retailer shares this morning. However, Wal-Mart was basically flat early on, and Costco was down about 1.5%. On the plus side on the retail front, plastic shoe maker Crocs Inc. (Nasdaq:CROX) jumped 24% on the opening after investors embraced the company’s outlook for the rest of the year. Crocs has been sinking like a rock since February, which puts today’s rally in a different perspective.
On the economic data front, the weekly claims data came in slightly better than the median forecast at 365,000 versus 375,000, but the report had very little impact on the market. The 10:00 a.m. ET wholesale inventories report came in soft at down 0.1% compared with the forecast for a gain of 0.5%. However, the wholesale inventory report is for March data, is considered dated by many traders and had almost no impact on prices when released.
Price action for small caps was bleak yesterday, with the Russell 2000 generating a bearish outside reversal on daily charts and faltering near a familiar zone that stopped the recovery back in early February. Some of the short-term players who caught the sharp decline may be in to pocket gains this morning, but the market action has clearly been top-heavy so far this week. If the selling momentum from yesterday kicks back into gear today, look for support in the Russell 2000 at 713.50, 708 and 700. Meanwhile, resistance is at 720.50, 726 and 731.
Broad market sectors in the green on the opening included several commodities related areas, including aluminum, metals and mining, steel and gold. Sectors under selling pressure included IT consulting (which took a big hit yesterday), wireless telecoms, and thrifts.
Among individual small-cap stocks, Einstein Noah Restaurant Group Inc. (Nasdaq:BAGL) was up about 25% after earnings and Gibraltar Steel Corp. (Nasdaq:ROCK) jumped about 22%, gapping higher, also on an earnings-tied boost. ARGON ST Inc. (Nasdaq:STST) rose over 10%, gapping higher after posting quarterly results. On the downside, Hardinge Inc. (Nasdaq:HDNG) was off 13% on soft earnings and MAP Pharmaceuticals (Nasdaq:MAPP) was down nearly 15% without fresh news after securing debt financing yesterday.
Stock market investors will likely continue to keep a close watch on crude oil today after the “black gold” market soared to record highs yesterday. An overnight rally in the dollar against the euro was erased about 20 minutes before the U.S. stock market opening, which could take some steam out of the bounce theory for stocks this morning.
“Positive momentum in crude oil futures and rising gasoline prices at the pump will likely evaporate any benefit of the fiscal stimulus package that consumers receive,” Scott Fullman, director of derivative investment strategy with WJB Capital Group Inc. said in an email. Fullman also said that implied volatility readings have hit the lowest levels since October, which suggests that investors may be too complacent. He recommends that equity portfolios be hedged against a potential major market movement over the next three to four weeks.
Some traders also were starting to look at the U.S. presidential race again, as Barack Obama widened his delegate lead over Hillary Clinton after Obama’s big win in North Carolina and Clinton’s modest win in Indiana. There is a sense among some traders that Obama’s policies would be less “market friendly” if he is the Democratic nominee, but those issues still have to play out over the next several months – even beyond the eventual naming of the Democratic nominee.
Traders are still looking toward earnings results from American International Group (NYSE:AIG), which could provide direction for financial shares. The company took a hit yesterday and was down about 1.5% early today awaiting the news. AIG earnings are slated to be released after the closing bell later today.
