Small caps flat while large caps struggle
Small-cap stocks waffled back and forth near steady levels into midday, with support from lower crude oil prices and a firm U.S. dollar countered by slumping technology stocks and worries about a global economic slowdown. At 12:48 p.m. ET, the Russell 2000 (NYSE:IWM) was up 1.20, or 0.16% at 739.70.
The Russell was holding up much better than other large-cap indices. The tech-laden Nasdaq 100 was down 1.3%, with key stocks like Intel Corp. (Nasdaq:INTC) and International Business Machines (NYSE:IBM) both generating sizable declines. INTC was off about 4% and IBM down about 2.5%.
In the lunchtime frame, Boston Federal Reserve Bank President Eric Rosengren said that the impact of rate cuts has been minimized by the credit crunch and he cautioned that the economy could slow down in the second half of 2008 and that the unemployment rate could surge beyond 6%. His comments seemed to have a much more dovish tone than recent Fed speak from Richard Fisher of the Dallas Fed and Jeffrey Lacker from the Richmond Fed.
Commodity names and tech stocks dominated the losing trends so far today, with coal, metals and mining, gold, semiconductors and semiconductor equipment among the biggest losing sectors. On the upside, healthcare facilities and airlines were doing well, with the latter boosted by the recent reprieve on the jet fuel front.
There were still some lingering jitters about a large hedge fund shutting down overnight. The fund, Ospraie Management LLC, had some $2.8 billion under management and reportedly has losing large sums of money on various commodity-tied equity investments. There are concerns that other hedge funds could be in a precarious position as well as the market unwinds the short dollar/long commodity trade. In the case of Ospraie, Lehman Brothers Holdings Inc. (NYSE:LEH) held a 20% stake in the hedge fund, but LEH shares were holding up reasonably well today near steady levels despite the news.
Individual small caps on the move today included Noble International Ltd. (Nasdaq:NOBL), which was up 10%, climbing to the highest point since March. NOBL shares have more than doubled since mid-July. Radian Group Inc. (NYSE:RDN) jumped 18%, topping the $5 mark for the first time since early June. On the downside, Micromet Inc. (Nasdaq:MITI) was off about 12% a day after announcing some management changes. The stock has been neatly tracking above the 20-day moving average for several months, but was in danger of the first hard daily close above that point in some time.
Looking at the chart picture for the Russell, the market is trading on an “inside” session today, meaning the ranges are within Tuesday’s action. Inside days typically reflect investor indecision, which is understandable as market watchers try to determine just why lower crude oil isn’t enough to sustain stock market rallies. Look for support on any pullbacks this afternoon along 734, then at 726. On the upside, resistance is pegged at 742, then at 748.
