Russell near flat, trims opening dip
Small-cap shares hovered near steady levels, trimming away opening losses tied to ongoing concerns in the financial sector amid reports that banks and brokerages need to raise capital. Another slip in crude oil prices likely muted selling interest in equities. At 10:05 a.m. ET, the Russell 2000 (NYSE:IWM) was off 0.66, or 0.09%, at 738.35.
Lehman Bros. (NYSE:LEH) remains at the eye of the latest financial storm, and was trading down 3.4% shortly after the open after tumbling 9.4% Tuesday on persistent talk that the brokerage firm would need to raise capital to shore up the balance sheet. The banking concerns were fanned overnight when ratings agency Fitch said that a couple of large French banks needed to raise capital. The European stock market took a hit on those concerns, losing about 2% heading toward the U.S. open.
The market navigated through a series of economic data this morning, with the final report from the ISM Non-Manufacturing Survey coming out at 10:00 a.m. ET. The ISM data came in at 51.7%, which was above the 51% forecast. There was a brief upside pop on the ISM release, but it didn’t appear to hold trader attention for long.
Earlier today, the ADP private employment survey showed a surprise rise in new jobs in May, which tugged stocks off overnight lows at the time, but had little staying power into the morning trade. In addition to ADP payrolls, the market saw a productivity report that came in just above the forecast at 2.6%, and an MBA mortgage application index that was at six-year lows. The trading shelf life on all of these data releases was collectively short. Later this afternoon near 2:00 p.m. ET, Federal Reserve Chairman Ben Bernanke will speak at Harvard, but his speech topic is titled “Economic Challenges: 1975 and Now” and he’s not taking questions, so it’s unlikely his appearance will stir the market. That said, foreign exchange markets were still buzzing about his rare direct comments on the dollar from Tuesday, which sparked a rally in the greenback.
The opening slide in stocks took place in the face of soft crude oil prices, which shows that the market does have more on its mind right now than just the energy market. Crude oil prices slipped $124 dollars a barrel overnight, pressured by news that India and Malaysia raised fuel prices, which could crimp demand out of Asia. The weekly oil inventory data should come out around 10:35 a.m. ET, which could spark a move in crude prices.
Barack Obama wrapped up the delegates needed to be named the “presumptive” nominee for the Democratic party last night, but many traders saw this as a given for the last several weeks and the market appeared to focus on other elements for trading decisions this morning. That said, the five-month debate over which candidate’s policies will be stock market “friendly” should kick off soon and will undoubtedly percolate under stock market trading for some time to come.
Broad market sectors under pressure this morning included homebuilders, wireless telecoms, coal and home furnishing shares. On the upside, consumer finance, health-care facilities and airlines were on the rise. The latter was lifted by the slide in crude oil prices.
Small caps on the move this morning included American Woodmark Corp. (Nasdaq:AMWD), which was off about 6% following earnings news and China Natural Resources (Nasdaq:CHNR), down about 9% on the release of its 2007 earnings report. On the upside, Zhongpin Inc. (Nasdaq:HOGS) rallied about 16%, gapping higher without any apparent fresh news. Also, Bob Evans Farms Inc. (Nasdaq:BOBE), which is on the high-side of a small-cap designation, jumped nearly 8% early on, gapping higher following strong earnings numbers.
Small caps slated to release earnings later today include Ulta Salon Cosmetics and Fragrance (Nasdaq:ULTA), Collective Brands Inc. (NYSE:PSS), Hovnanian Enterprises (NYSE:HOV), Conns Inc. (Nasdaq:CONN), Volt Information Sciences (NYSE:VOL) and CPI Corp. (NYSE:CPY).
