Russell in the red as consumer sentiment at 28-year lows
Small-cap stocks edged lower, unable to sustain a pre-opening upside pop tied to housing starts data. In addition, the latest consumer sentiment survey from the University of Michigan was below expectations, which tugged down stock prices. At 10:07 a.m. ET, the Russell 2000 (NYSE:IWM) was down 5.80, or 0.78%, at 737.58.
The University of Michigan consumer sentiment survey came in at 59.5, which was below the projection of 62. The figure was the lowest May reading in 28 years, and underscores consumer trepidation about lofty gas and food prices.
April housing starts came in at an annualized rate of 1.032 million units, which was well above the forecast of 940,000. In addition, permits were up 4.9%. It should be noted that these are still weak numbers, especially since the number was fueled by multi-family units — not single-family homes.
Today serves up a double witching expiration for stocks, with equity and cash index options for May on the expiration block. With the SPX climbing well past the concentrated strike at 1,400, it might have taken some of the punch out of expirations, but there could be added volatility in play from the expiry.
Action in crude oil futures will likely be on the radar screen for stock market traders today following another jump in crude values overnight back above $127 dollars a barrel. Although energy stocks might get a lift from higher crude, the market overall has typically seen rising crude prices as a negative because consumer spending is already pinched by lofty gas and food prices.
Retailer shares remain in the spotlight today with Nordstrom (NYSE:JWN), Kohl’s (NYSE:KSS) and Abercrombie & Fitch (NYSE:ANF) all reporting earnings. Shortly after the opening, Nordstrom was up 2.2%, Kohl’s was down 2.1% and Abercrombie & Fitch was up 1.2%.
Among broad market sectors of note, retail stocks were clearly out of favor early this morning, with home furnishing retail, automotive retail, specialty stores, apparel/accessory and department stores all in the red. On the upside, oil & gas, gold, integrated oil and refining shares were attracting buyers.
Among individual small caps, Exar Corp. (Nasdaq:EXAR) tumbled 12%, gapping lower on an earnings-related slide. Trico Marine Services (Nasdaq:TRMA) was off about 7% amid news that the company will acquire outstanding shares of DeepOcean. On the upside, China Precision Steel (Nasdaq:CPSL) was up 34%, gapping higher on earnings news.
From a technical analysis perspective, small caps notched the highest close since early January on Thursday, which keeps equity heat on losing short positions. The recent extension of the rally has been accomplished on light volume, which is a concern, but the price action must be respected. Still, the Russell 2000 now enters the next key resistance zone from 743 to 750, and it would be a surprise to see 750 tackled without a fight. If the market can push through 750 today, there is mild resistance at 754, then a better level up at 760. On the downside, support today is at 735 and at 731. A weekly close below either of those levels would leave charts looking top-heavy.
