Small caps flying high
The Russell 2000 (NYSE: IWM) is posting strong gains despite news of worse-than-expected durable goods orders and a drop in existing home sales.
At 10:44 a.m. ET, the small-cap index had advanced 20.49 points, or 2.76%, to 763.76. The Dow Jones Industrial Average (INDU) was up 230.87 points, or 1.78%, to 13,189.31.
The U.S. Census Bureau reported before the opening that orders for durable goods, which are goods intended to last at least three years, declined 0.4% in October to $214.45 billion. Economists were expecting orders to stay flat after falling a downwardly revised 1.4% in September.
New orders for non-defense capital goods, an important measure of business spending, fell 3.1% to $72.5 billion.
That tells us that businesses are growing cautious, another sign of a pending slowdown in economic growth.
Investors will also have their eyes on the U.S. Federal Reserve, which will release its “beige book” of information about regional economic conditions at 2 p.m. ET.
More bad economic news came in the form of a 1.2% drop in U.S. existing home sales.
The National Association of Realtors reported after the start of trading that existing home sales for October fell to an annual pace of 4.97 million from revised 5.03 million in September. Economists were expecting a more modest decline to an annual rate of five million.
Needless to say, the numbers confirm the dire state of the U.S. housing sector, which continues to stagnate.
With all the bad news, why are the bulls on a stampede?
It could have something to do with a report in The Wall Street Journal that Citigroup Inc. (NYSE: C) rejected a merger proposal from Bank of America Corp. (NYSE: BAC). That news helped financial shares move up out of the gate.
Also contributing to the bullish sentiment was news that U.S. Federal Reserve Vice Chairman Donald Kohn told an audience in New York that the Fed needs to be “nimble” in its monetary policy. That remark is being interpreted as a hint that the central bank is considering a cut in its target interest rate when it next meets on Dec. 11.
Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• China Natural Resources Inc. (CHNR), up 19%. A company representative could not be reached for comment.
• China Finance Online Co. Ltd. (JRJC), up 19% on news it has completed the acquisition of 85% equity interest of a licensed securities brokerage firm in Hong Kong.
• Security Capital Assurance Ltd. (SCA), up 17%.
Biggest percentage losers:
• Acorn International, Inc. (ATV), down 21% on news that third-quarter net income came in below expectations.
• Central Garden & Pet Co. (CENT) down 18% on news of a fiscal fourth-quarter net loss.
• BIDZ.com, Inc. (BIDZ), down 19% even though the CEO has denied a report claiming the company engages in shill bidding and holds excessive inventory.
