Small caps are posting gains
The Russell 2000 (NYSE: IWM) is posting solid gains after a bearish start. At 12:41 p.m. ET, the small-cap index had advanced 4.42 points, or 0.64%, to 693.02. The Dow Jones Industrial Average (INDU) had climbed 38.61 points, or 0.32%, to 12,245.78.
Stocks small and large have recovered from a brief dip at the start of the session and are now comfortably in the green.
Corporate earnings took center stage this morning following news before the opening from fast food chain operator McDonald’s Corp. (NYSE: MCD) that sales at restaurants open at least 13 months were unchanged in December, while analysts were expecting a rise.
“While severe winter weather throughout the month and softer consumer spending resulted in December U.S. comparable sales being flat, we remain confident in our U.S. business,” said CEO Jim Skinner in a statement.
The Oak Brook, Ill.-based company also reported that its net income for the three months ended Dec. 31 increased to $1.27 billion, or $1.06 per share, compared with $1.24 billion, or $1 per share, a year earlier.
But the December sales number nevertheless spooked investors already on edge about the possibility of a U.S. economic recession. With consumer spending comprising about 70% of gross domestic product, a slowdown spells trouble.
Investors are bearish about restaurant shares today, while apparel retailers are rising.
Adding to the economic concerns was power tool maker The Black & Decker Corp. (NYSE: BDK), which forecasted before the start of trading that its first-quarter profit will come in below analysts’ projections.
CEO Nolan Archibald in a statement said in a statement that he does not foresee the housing sector recovering in 2008.
Indeed, statistics released by the U.S. Census Bureau after the start of trading show that new home sales in December fell 4.7% to an annual rate of 604,000. The rate in November was a downwardly revised 634,000.
The numbers surprised to economists, who were expecting to see a considerably smaller decline.
The December rate is the lowest in almost 13 years and a whopping 40.7% below the rate during the same month of 2006. At the current sales rate it would take 9.6 months to sell all available houses, the most in over two decades.
An estimated 774,000 new homes were sold in 2007, 26.4% below the 2006 figure of 1,051,000.
Elsewhere, the price of oil has fallen $0.16 to $90.55 a barrel.
