Russell treading water as Chicago PMI offsets crude rise
Small-cap stocks hovered near steady levels in early trading, with pressure from higher crude oil prices offset by a better-than-forecast figure for the Chicago Purchasing survey. At 9:54 a.m. ET, the Russell 2000 (NYSE:IWM) was up 0.42, or 0.06%, at 698.56.
The Chicago Purchasing Manager’s Survey headline figure came in at 49.6, which was well above the forecast for a figure of 48. Despite the bullish surprise on the report, it still marked a fifth consecutive month below 50, which indicates contraction in the Midwest business sector.
Crude oil prices climbed to a fresh record high ahead of the U.S. stock market opening, and remained solidly higher in early U.S. trading. The U.S. dollar pushed to three-week highs against the euro overnight, but backed off those highs and was up about 0.1% versus the euro at the time of the stock market open today. The dollar was down against the yen, sinking about 0.3%, which is supportive to the commodity markets.
Large-cap stocks of note this morning include MBIA Inc. (NYSE:MBI), which was off at 52-week lows amid credit rating downgrades. MBI shares were off 0.7% shortly after the open. Meanwhile, H&R Block Inc. (NYSE:HRB) was up 9.7% after topping analyst estimates for quarterly results.
Broad market sectors on the rise this morning included coal, oil exploration and production, diversified metals and mining, oil and gas storage and transportation and steel stocks. On the downside, food distribution, airlines, specialty stores and food retail stocks were all in the red.
Small caps of note included Aceto Corp. (NYSE:ACET), which was up about 13%, reversing a steep slide from last week amid oversold conditions. Orbotech Ltd. (Nasdaq:ORBK) was up about 14%, recovering from a big slide Friday in the wake of news that the firm would acquire Photon Dynamics. Also, Avocent Corp. (Nasdaq:AVCT) was up 11%, testing six-month highs from about three weeks ago.
Small caps attracting sellers included Life Partners Holdings Inc. (Nasdaq:LPHI), which gapped lower and was down about 12% despite the fact that the company was added to the Russell 3000 Index. LoJack Corp. (Nasdaq:LOJN) was down about 8% shortly after the open, testing 52-week lows.
The chart structure remains top-heavy, but momentum readings are rapidly approaching oversold levels that sparked the recovery moves back in January and March. Key support this week is at 690, which marks a 61.8% Fibonacci retracement of the entire rally off the March lows. If the market slips through 690 with conviction this week, then the next support is down at 681. On the upside, if the market can stabilize and bounce, immediate short-term resistance is at 704, then at 712, but the big testing zone will be up at 717.50 to 720.50.
