Small caps fret about autos, but surge on commodities
Small-cap stocks pushed higher Wednesday, powered by gains in commodity stocks, but the move briefly lost steam in mid-afternoon as worries surrounding a proposed bailout for U.S. automakers came back into play amid Republican opposition to the $15 billion plan. The Russell 2000 (NYSE:IWM) closed up 10.69, or 2.30% at 476.40, and is now down 38% for the year. The Dow closed up 0.81% and is down 34% for 2008, while the S&P 500 was up 1.19% Wednesday and down 39% for the year.
Senator Richard Shelby of Alabama called the bailout a “travesty” and threatened to implement procedural roadblocks to stall the bill, which sent a shudder through automaker stocks and widened corporate bond spreads. General Motors Co. (NYSE:GM) closed down about 2.1%, while Ford Motor Co. (NYSE:F) was up 0.6%.
Commodity markets have been pummeled mercilessly for months, but were in vogue again today, with the Commodity Research Bureau Index rising 2.6%. Crude oil futures were up 3.4% or $1.45 a barrel to $43.52, which provided a lift to energy stocks. The Energy Select Sector SPDR Fund rallied 5%, far outpacing the rest of the market.
And even though energy always grabs the lion’s share of attention, other commodity markets contributed to equities today, with mining, metals and gold stock among the best percentage performers today. Some of the rise in mining stocks likely stemmed from news overnight that Rio Tinto PLC (NYSE:RTP) decided to slash 14,000 jobs, cut costs and raise capital, which sent which sent the world’s third-largest miner into rally mode. RTP shares jumped 27% today in U.S. trading.
Once again today, financial shares were a drag on the bullish party, as concerns about the credit crisis and tight lending continue to be in play. Also, early declines in Treasury products were whittled away in the afternoon, which keeps concerns about money flow in the mix. That said, today’s three-year note auction came in at a higher-than-expected yield, which provided some relief to stocks overall.
Individual small caps on the move today included American Land Lease Inc. (NYSE:ANL), which gapped higher on news that the real estate investment trust was being bought at a huge premium to previous capitalization. ANL shares stormed 221% higher on the news. Atlas Pipeline Holding LP (NYSE:AHD) rallied 45% to close above the 20-day moving average for the first time since late September. Ann Taylor Stores Corp. (NYSE:ANN) jumped 20% and itself closed above the 20-day moving average for the first time since mid-September. On the downside, Movado Group Inc. (NYSE:MOV) continues to struggle, sinking to fresh 52-week lows as the designer and distributor of fashion brand watches slumped 14%.
The chart picture has started to cloud over a tad, taking some of the bullish edge off recent action. Even today’s recovery move was accomplished on an inside session in the shadow of Tuesday’s more powerful reversal. The market faltered Tuesday on our key resistance zone at 491 and was unable to sustain intraday highs today. The market needs to sustain price action above 473 and hold that line or risk rolling over into a bearish posture that would suggest a retest of the recent range lows down at 416. Perhaps it will take a decisive move from Friday’s retail sales and PPI reports to jolt the market onto a more clearly defined path, but there is a chance that Thursday’s weekly claims data also could spark a more dramatic breakout type of move.
