Russell up on earnings, economic data, overseas gains
Small-cap stocks pushed higher on the opening, lifted by solid earnings results from key names in the large-cap arena, which spilled over into the overall market psyche. In addition, economic reports have been a mild upside surprise this morning and stock markets overseas were higher overnight, which helped set up a platform to extend Wednesday’s big rally. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was up 3.35, or 0.49%, at 690.10.
In overseas trading, European shares were up about 2%, Japan was up 1%, Hong Kong rallied 2.4%, Taiwan surged 3.9%, India was up 4.2%, South Korea up 1.2%, Singapore up 1% and Australia up 0.6%.
Crude oil futures drifted higher after the stock market open, which drained away some of the morning gains in equities. Crude oil prices were lower overnight, and are down some $10 dollars a barrel off the recent highs, but traders remain sensitive to the volatile nature of energy markets, especially when recent declines have been short-lived.
Headline figures from economic data this morning have been much improved over the sobering inflation reports seen Tuesday and Wednesday. Weekly claims rose to 366,000 this week, but were below expectations for a rise to 380,000. Also, housing starts jumped 9.1%, which was far better than the forecast for a 1.5% dip. However, the housing starts report was boosted by data quirk adjustments and it will take more evidence in future reports to suggest that the housing market is anywhere near the recovery road.
The final piece of today’s data puzzle came in at 10:00 a.m. ET, with the July Philly Fed Survey, which came in softer than expected at minus 16.3 and appeared to pull stock index products off the morning highs.
The market is now deep into Q2 earnings season, and some of the “big” names on the large-cap front continue to paint a better-than-expected picture, which has given the overall market a lift the last couple of days. Wednesday’s big news came from Wells Fargo & Co. (NYSE:WFC) announcing a 10% dividend hike after decent results, which soothed jagged edges in the financial arena and the news today remained decent as JP Morgan (NYSE:JPM) topped the forecast. JPM shares were up 10% shortly after the open.
Other key stocks that beat the estimate this morning included United Technologies (NYSE:UTX), which is seen as a barometer for the economy. UTX shares were up 6% early today. Of course, all the news wasn’t good. For example, Internet retailer eBay Inc. (Nasdaq:EBAY) tumbled 14% as the market wasn’t impressed with the outlook.
Broad market sectors on the rise this morning were topped once again by thrifts and mortgage finance firms. Financial stocks were doing well again, with diverse financial services up, regional banks higher, investment banks on the mend and diversified banks rising. Also, construction material shares were higher, as were homebuilders and motorcycle manufacturers. On the downside, casinos were slumping. Food retail stocks, tobacco and restaurants were slipping.
Individual small caps of note included Catalyst Semiconductor (Nasdaq:CATS), which gapped higher on unusually heavy volume, soaring 52% on news that ON Semiconductor (Nasdaq:ONNN) would acquire the firm in a stock transaction worth some $115 million. USA Truck Inc. (Nasdaq:USAK) rallied 29% after solid earnings and Banner Corp. (Nasdaq:BANR) was up 14%, pulling above the 20-day moving average in the process. On the downside, TeleTech Holdings Inc. (Nasdaq:TTEC) crashed 31%, gapping lower after restating financials. Insteel Industries Inc. (Nasdaq:IIIN) tumbled 20% after earnings disappointed investors.
The chart picture has improved tremendously this week, starting with a sound rejection of fresh move lows Tuesday, the formation of a doji reversal candle, and the required validation of that pattern during Wednesday’s rally. If the Russell can sustain upward momentum through the rest of the week, then it will forge a bottoming pattern on weekly studies, which is important for the longer-term perspective. From a short-term standpoint, look for resistance at 696, 701 and 707.50. If the market starts to wobble, support should be seen at
