Small caps climb ahead of Fed announcement
Small-cap stocks are rallying in Wednesday midday trading, as oil futures declined sharply after the Energy Department said oil and fuel supplies are larger than expected. Investors are waiting for news from the Federal Reserve’s rate committee, which wraps up a two-day meeting this afternoon. The Fed is widely expected to end the rate cut cycle and talk tough on inflation. At 2:01 p.m. ET, the Russell 2000 (NYSE:IWM) was up 7.88, or 1.11%, at 715.80.
Crude oil prices are sharply lower in afternoon trading. The Energy Department said in its weekly inventory report that crude oil supplies rose, while Wall Street expected a 1.7 million barrel decline. The supply increase gave investors reason to believe that skyrocketing gas prices have lowered demand. Crude is down 3% to $132.73 a barrel in recent trading.
The new home sales report clocked in at minus 2.5% and the inventory of new homes was at 10.9 months, which was a mild rise over the previous report. Although the home sales data was weak, it didn’t deter the stock market, which is already focused on the Fed later today.
“Set the snooze button for 2:15 ET PM today for the FOMC decision and we'll all be tearing apart the text for nuances on what to expect going forward. Market has 50 basis points of tightening priced in for Fed Funds by the end of December,” Andy Busch, global foreign exchange strategist for BMO Capital Markets, said in an email. “The U.S. Treasury's auction of two-year notes Tuesday showed a big surge in demand with the bid to cover ratio at 2.64, up from 2.28 last and an indirect foreign bids of 27.7% that show Treasury market participants believe the Fed tightening talk is over done.”
Earlier this morning, orders for May durable goods came in unchanged, which was slightly softer than the forecast for a rise of 0.1%. Although durables missed the median forecast, it was close enough to have very little impact on stock market trading.
Large-cap stocks in the news this morning that could impact sector pricing and spillover into small caps included AT&T (NYSE:T), which was up 2% on upbeat analyst comments. Also, Jabil Circuit Inc. (NYSE:JBL) topped the earnings forecast and rallied 16%.
Broad market sectors on the rise this afternoon include apparel retailers, hotels and motels, advertising services, restaurant services, airlines, fabricated plastics and printing services. On the downside, coal energy, oil and gas operations, construction and agricultural machinery, construction supplies, gold and silver and oil well services companies are attracting sellers.
Small caps of note Wednesday afternoon were highlighted by LCA Vision (Nasdaq:LCAV), which tumbled some 19% as the company lowered the outlook for the second quarter. Apogee Enterprises (Nasdaq:APOG) stumbled 17% after posting disappointing quarterly results. Pyramid Oil Co. (AMEX:PDO) has fallen 17% after Citron Research put out a negative report on the company.
On the upside, HireRight (Nasdaq:HIRE) climbed 15%, gapping higher following plans to release a new employee screening product. Gateway Financial Holdings Inc. (Nasdaq:GBTS) climbed 13%, recouping some of the sharp recent losses that pushed the share to multi-month lows. Winn-Dixie Stores (Nasdaq:WINN) was up 14%, bouncing after hitting five-month lows Tuesday.
