Small caps brush off bleak jobs on bargain hunting, oversold condition
Small-cap stocks pushed higher on the opening, showing a resilient rise in the face of yet another downbeat economic report. Today’s monthly employment release showed unemployment at 14-year highs, but the market was oversold and a dreary report was already priced into expectations. At 9:57 a.m. ET, the Russell 2000 (NYSE:IWM) was up 2.57, or 0.52%, at 498.41.
The employment report showed a decline on non-farm payrolls of 240,000, which was above the early consensus forecast for a decline of 180,000, but which was in line with some of the “whisper” numbers making the rounds the last couple of days. Just yesterday, researchers at Goldman Sachs raised their forecast to a loss of 300,000, and considering upward revisions to August and September data they basically hit the number.
It was interesting to see the initial response, which was that “yes, the report is awful, but it’s not a surprise.” There is also a mentality that the market was already coming off the worst two-day collapse since 1987, so a fair amount of bad news on the jobs front was already priced into things.
Still, the numbing headline off the jobs report is that unemployment spiked to 6.5%, the highest point since 1994. However, even that scary thought has been priced into the market mentality, as many economists already cautioned that unemployment could reach 8% by next year. In a perverse way, there was some “hope” that this awful jobs report would simply speed up another stimulus program from the government.
President-elect Barack Obama is slated to hold his first post-election news conference later this afternoon after meeting all day in Chicago with a team of economic advisors. Aides to Obama have already said this morning that he will not announce any political appointments yet.
Individual small caps of note this morning include LandAmerica Financial Group Inc. (NYSE:LFG), which stormed 78% higher on news that Fidelity National Financial Inc. (NYE:FNF) would buy LFG for $126 million in stock. Fuel Systems Solutions Inc. (Nasdaq:FSYS) was up 26%, receiving an earnings lift. On the downside, Delta Petroleum Corp. (Nasdaq:DPTR) was down 31%, gapping lower on news that Tracinda Corp. will not proceed with a previous tender offer for 14 million shares of DPTR.
On the large-cap earnings front, Ford Motor Co. (NYSE:F) reported a staggering quarterly loss of nearly $3 billion. On Thursday, representatives with Ford and General Motors Co. (NYSE:GM) were in Washington pressing government officials for a huge $50-billion loan. Ford shares were actually up about 1.5% early today, and GM – who reports today as well – was up about 2.7%.
Crude oil edged slightly higher this morning, mimicking minor losses in the U.S. dollar. Energy stocks performed well in Europe ahead of the jobs report this morning; commodities in general have been clobbered again this week and could be ripe for a little corrective bounce.
The chart picture has clearly deteriorated this week, and it will be important to watch the battle surrounding the “figure” line at 500 today. A weekly close back below that point would be a troubling development, especially since there is only token support down near 481 and 460 on the way back toward a retest of the move lows. If the market can set aside today’s jobs report as a non-event, then resistance today comes in at 514.50, then at 525.
