Small caps fall as inflation rises
The Russell 2000 (NYSE: IWM) and the other major U.S. indices are falling on news that January inflation outpaced expectations.
At 10:34 a.m. ET, the small-cap index had declined 3.90 points, or 0.56%, to 698.44. The Dow Jones Industrial Average (INDU) was down 71.56 points, or 0.58%, to 12,265.66.
The consumer price index added 0.4% in January, the U.S. Labor Department reported before the start of trading. Economists were expecting the CPI to rise 0.3%. Consumer prices have added 4.3% on a year-over-year basis.
The core inflation index, which excludes the price of food and energy, gained 0.3%, above the projected 0.2%. Core prices have added 2.5% on a year-over-year basis.
The U.S. Federal Reserve has stated that it prefers annual core inflation to be in the range between 1% and 2%.
News of higher-than-expected inflation complicates the Fed’s task of lowering its target interest rate to spur economic growth while simultaneously keeping inflation in check. The U.S. central bank will probably grow more cautious, as any cut in the federal funds rate will give the economy a jolt that could also lead to a rise in prices.
The data today suggest that the U.S. economy finds itself in a bad situation, stuck between slow growth or a possible recession on the one hand, and the risk of rising inflation on the other.
Small-cap stocks are falling, with shares of NutriSystem Inc. (Nasdaq: NTRI) leading the way.
The Horsham, Pa.-based weight-loss company reported that its fourth-quarter profit slimmed down to $0.31 per share from $0.53 per share a year earlier.
A.C. Moore Arts & Crafts, Inc. (Nasdaq: ACMR) is also a loser, its shares suffering after the specialty retailer announced that fourth-quarter same-store sales fell 14.5%.
Medical devices maker The Spectranetics Corp. (Nasdaq: SPNC) is also in the red after reporting a fourth-quarter net loss.
