Russell rallies on claims, chain-store sales
Small-cap stocks pushed higher on the opening, supported by better-than-expected weekly unemployment claims numbers and solid May chain store sales figures. However, the market was still on edge about the re-emergence of credit crunch jitters and, to some degree, simply marking time before Friday’s big jobs report. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was up 5.91, or 0.79%, at 749.62.
The weekly claims report headline figure came in at 357,000, which was much better than the forecast of 375,000. Typically, the weekly claims data is a minor blip on the numbers agenda, but with the monthly employment report on tap Friday, investors had a little extra interest in the numbers this week. Also, the ADP payroll figures were surprisingly strong Wednesday, which raises hope that Friday’s big jobs release could carry a bullish surprise.
Chain store sales results have been pouring in this morning, sporting solid numbers for discounters in particular. Costco (Nasdaq:COST) same-store sales in May were up 9% and Wal-Mart (NYSE:WMT) reported a 3.9% rise in sales. Costco shares were up 1.9% after the opening, while Wal-Mart was up about 1.8%.
Investors are expected to keep a close watch on financial stocks again today, particularly Lehman Bros. (NYSE:LEH), which is at the eye of the latest credit crunch storm. Lehman Bros. shares were up 2.5% in early trading today. Federal Reserve vice chairman Donald Kohn is testifying about the banking system this morning before the Senate, Banking, Housing and Urban Affairs Committee.
The dollar relinquished overnight gains against the euro and is now down about 0.6% against that currency unit, but was still up nearly 0.8% versus the yen. A strong dollar should keep pressure on various commodity markets, and is seen as supportive to stocks at this stage of the economic cycle.
Speaking of commodities, crude oil prices were pushing higher into the stock market opening in line with the rise in the euro against the dollar, but were still well off the recent record highs and not that far away from four-week lows. The recent slide in energy prices has provided a little breathing room for airlines, which also stand to benefit from an analyst upgrade overnight on United Airlines (Nasdaq:UAUA) and Northwest Airlines (NYSE:NWA). United Airlines was up 6.8% after the open, while Northwest Airlines was up 6.7%.
Broad market sectors on the rise this morning included distillers, airlines, steel, hypermarkets/supercenters and coal stocks. Meanwhile, software, farm machinery, gold and health-care services shares were attracting sellers.
Individual small caps of note included Hot Topic Inc. (Nasdaq:HOTT), which was up 12.7% as the pop culture retailer came in with May sales that were much better than the forecast. Sticking with the retailer theme, Cache Inc. (Nasdaq:CACH) rallied nearly 9% as comp store sales were up 5% over last year. Tercica Inc. (Nasdaq:TRCA) gapped higher on huge volume, soaring nearly 98% on news that the firm was about to be acquired for $404 million by French drugmaker Ipsen (EPA:IPN). On the downside, AtriCure Inc. (Nasdaq:ATRC) was off nearly 7% without any apparent fresh news.
The Russell was once again testing key long-term resistance at 750 — a line that has capped rally attempts on several occasions of late. If the market can push through that line, then the next resistance points to watch are at 754 and 760. If the market starts to wobble later today, support is at 741 and 735.
