Russell mildly dips on month-end profit-taking
Small-cap stocks edged slightly lower shortly after a brief opening bid, pulled down by profit-taking from short-term traders who caught this week’s surge to the highest prices since January. Still, the market managed to dodge several data landmines this morning, as a batch of economic figures were basically in line with expectations. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was down 2, or 0.27%, at 743.55.
The Chicago Purchasing Manager’s Survey came in at 49.1, which was above the forecast at 48.5. Although the reading was slightly above expectations, it had only a muted impact on stock prices as the number was still below 50 for the fourth consecutive month.
Also, the Michigan sentiment survey came in at 59.8, just slightly above the forecast of 59.5, but still at 28-year lows.
Before the opening, the personal income headline figure and the core PCE deflator both were in line with analyst projections, which supported both stocks and bonds in pre-opening activity. The core PCE is considered to be the Federal Reserve’s preferred inflation gauge, and the moderation in the number should allay some inflation fears that have stoked up lately.
Tech stocks were expected to get a lift today from positive earnings news from Dell Inc. (Nasdaq:DELL) and Marvell Technology Group (Nasdaq:MRVL), both of which were seeing impressive percentage gains this morning after topping earnings estimates overnight. In the financial sector, American Insurance Group (NYSE:AIG) was up 3.3% early after Morgan Stanley upgraded the insurer. Although good news dominated the market so far today, there were some sour notes to be found for large caps, including J. Crew Group (NYSE:JCG), which was off about 20% after reducing guidance and being downgraded by Citigroup.
Month-end window dressing could be a factor in the markets again today, and there could also be a push from some fund managers who are under invested to join the party as this is the last trading day of the month.
Broad market sectors pushing higher after the opening included fertilizers, steel companies, insurance firms and IT consulting stocks. On the downside, department stores, apparel accessories, apparel retail and home furnishing retail all attracted sellers.
Individual small caps on the move early today include Wind River Systems (Nasdaq:WIND), which gapped higher, gaining about 9% on an earnings-tied boost. Wet Seal Inc. (Nasdaq:WTSLA) rallied about 19%, also getting a quarterly results lift. On the downside, Sigma Designs Inc. (Nasdaq:SIGM) tumbled some 16% after missing the sales forecast.
Another small cap of note, US Airways (NYSE:LCC) opened down about 1.6% on news that the company’s CEO told employees that the airline would not consider mergers at this time. On Thursday morning, US Airways got a boost from talk that a merger with United Airlines could be in the offing, but those talks apparently broke off late yesterday.
Small caps slated to release earnings later today include Graham Corp. (AMEX:GHM) and Kirklands Inc. (Nasdaq:KIRK).
From a charting perspective, the Russell 2000 is a little overbought on short-term momentum readings and vulnerable to a profit-taking dip from longs who caught the move ahead of the weekend. Also, staunch resistance is still in play near the 750 zone, which marks a 50% retracement of the entire bear market collapse. If the market does manage to push through 750, then there is minor chart resistance at 754, and another solid test up at 760. If the market slips today, then support should be seen at 739, 735 and 731.
