Small caps open higher
Small-cap stocks gapped higher on the opening, with the Russell 2000 (NYSE:IWM) extending overnight gains on the coattails of good news in the tech sector. The tone for today’s early action was clearly established yesterday afternoon when after-market stock trading hit the ground running following better-than-expected earnings from Intel Corp. (Nasdaq:INTC).
The market appears to be focused on earnings news at this stage. When stepping back from the expectations, the numbers are generally weak, but that has been priced into both market valuations and psychology, which helps fuel gains when the numbers are slightly better than forecast.
Although Housing Starts data slumped to a 17-year low in March, the market basically shrugged it off as no surprise — after all, it’s a known fact that the housing market is in the midst of a severe pullback. In addition, U.S. CPI data rose 0.3% in March, which was in line with expectations. It might be painful to fill up the gas tank right now, but food prices are beginning to stabilize, which kept the inflation data from being a big concern.
The final morning economic report on Industrial Production was actually above the forecast, and enabled the market to retain a positive frame into the opening, even if the release was boosted by gains in energy prices and seasonal weather (i.e., the market was in the mood to see the glass half full, not half empty).
Among small-cap issues, big morning movers on the upside include AgFeed Industries, Inc. (Nasdaq:FEED), which gapped open to fresh 52-week highs on news that the firm will acquire commercial hog farms in China. Pozen Inc. (Nasdaq:POZN) shot up 37% in early action to the highest point since August following FDA approval for a migraine drug.
From a chart perspective, it will be interesting to see if the Russell 2000 can sustain the initial thrust this morning above 695. If so, it sets up a test of 712, 721 and perhaps the big point at 731 in the days to come. In recent days, the market has seen a bullish cross of the 20-day and 50-day moving averages; the last time we saw this take place was last autumn on that final big push toward the summer 2007 peak.
In addition to various earnings reports, Federal Reserve official Janet Yellen will speak about the economy at 11:45 a.m. ET, and the Beige Book report will be released this afternoon at 2:00 p.m. Small-cap earnings on tap in the next few hours include: Badger Meter Inc. (AMEX:BMI) at 11:00 a.m. ET, Banco Latinoamericano (NYSE:BLX) at 11:00 a.m. ET, Donegal Group Inc. (Nasdaq:DGICA) at 11:00 a.m. ET and Medtox Scientific Inc. (Nasdaq:MTOX) at 10:30 a.m. ET.
