Small caps climb into the green on Fed remarks
Small caps gained shallow ground midday on the heels of Fed Chairman Bernanke’s sanguine comments surrounding the aftermath of the credit crisis and banks’ recent abilities to raise capital in response.
At 1:08 p.m. ET, the Russell 2000 (NYSE:IWM) edged up 3.89, or 0.53%, to 739.96 while the Dow gained 51.37, or 0.4%, to 12,949.75.
In a prepared statement to a Chicago Fed conference, Bernanke offered encouraging remarks this morning when he addressed lessons learned from the credit debacle. The Fed Chair said conditions remain delicate and encouraged banks to continue being “proactive” in raising needed capital to create new profit opportunities as the economy and financial markets improve.
“Importantly, capital raising and balance sheet repair allow for the extension of new credit, which supports economic expansion,” Bernanke said.
He also noted that banks that closely monitored valuation inaccuracies of financial instruments fared better.
In economic news, investors shrugged off a slew of downbeat data. The Philadelphia Fed survey clocked in at negative 15.6, which was better than the projection for a decline of 19. That report followed disappointing numbers from the release of Industrial Production and the New York Manufacturing Survey, both of which pointed to a bleak manufacturing activity. Industrial Production was pegged at minus 0.7%, which was below the forecast for a dip of 0.3%. Meanwhile, the NY Manufacturing data came in at minus 3.23 for May, below the forecast for 0.00.
In addition, the Weekly Claims report edged slightly higher to 371,000, which was just above the forecast of 370,000.
On the commodity front, after spending much of the session higher on reports of a Nigerian gas pipeline explosion, crude oil prices slipped. A barrel of crude traded down $1.55 to $122.67 a barrel. The dollar is mixed against the euro and the yen, while gold has gained $15.50 mid-session to $882 per troy ounce.
Among industry groups, coal is seeing the most upside midday—up 4%, while tobacco, insurance and basic materials are under pressure.
In large cap headlines, CBS (NYSE: CBS) said today that it will purchase online news provider CNET Networks for roughly $1.8 billion. General Electric (NYSE:GE) said it plans to put its appliance unit on the market and could go for $5 billion and $8 billion. Activist investor Carl Icahn officially initiated a proxy contest to oust Yahoo Inc.'s (Nasdaq:YHOO) entire board. Mr. Icahn has already nominated 10 members for Yahoo’s board, including Mark Cuban and former head of Viacom Frank Biondi.
Among individual small caps, Yucheng Technology (Nasdaq:YTEC) plummeted 25% midday after reporting a minor miss in earnings Wednesday evening due to the aggressive roll-out of its China merchant credit card systems. Amtech Systems (Nasdaq:ASYS) is receiving a haircut after reporting fiscal second-quarter earnings after Wednesday’s close that missed the mark by 75%. Shares of Perceptron, Inc. (Nasdaq:PRCP) are off 15% after the provider of information-based measurement and inspection services for the auto-industry reported fiscal 2008 third-quarter earnings substantially below the sole analyst’s estimate on Wall Street.
On the upside, Chinese watch movement and watch distributor Asia Time Corp. (Amex: TYM) is up 30% after reporting a robust first quarter.
