Small caps push higher
Small-cap shares pushed higher shortly after the opening, underpinned by decent earnings news and a lack of follow through on the safe-haven trade that dominated action Tuesday. At 10:01 a.m. ET, the Russell 2000 (NYSE:IWM) was up 3.32, or 0.45%, at 738.97.
The fact that stocks were able to look past yet another record high in crude oil prices was impressive, as most of the overnight news was tilted toward the bearish angle for equities. Crude oil prices climbed past $130 dollars a barrel, but it appeared that move had already been priced into the “fear” quotient during Tuesday’s decline.
In addition to the rally in crude oil, the U.S. dollar took a hit overnight, sinking about 0.7% versus the euro, and 0.3% against the yen. The greenback did appear to trim those losses when the stock market edged higher after the open.
The market has very much been tied to investment flows of late, and there is some thought that the market is underinvested in stocks with huge cash on the sideline. As that cash starts to chase the rally off the March lows, it could be enough to power the market higher, but it’s a tenuous play given strapped discretionary spending for consumers. Days of extremely light volume suggest that the sideline players remain unconvinced about the staying power of the recent upswing in equities.
The market should be able to navigate today without volatility scares from economic data, although the 2:00 p.m. ET release of FOMC minutes could stir the afternoon pot a tad.
Shortly after the opening, broad market sectors in the green included coal, gas utilities, home entertainment software and agriculture products. Airlines, specialized finance, homebuilders and casinos were taking a hit.
In terms of individual small-caps of note, Willow Financial Bancorp (Nasdaq:WFBC) jumped some 22% this morning, gapping higher on news that the firm would merge with Harleysville National Corp. (Nasdaq:HNBC). Palm Harbor Homes (Nasdaq:PHHM) was up about 12%, benefiting from an earnings boost. Adolor Corp. (Nasdaq:ADLR) was up about 9%, gapping higher after FDA approval for a drug to treat bowel surgery patients. On the downside, Virtusa Corp. (Nasdaq:VRTU) was off some 13% after sloppy earnings.
Small-cap companies slated to release earnings later today include, CDC Corp. (Nasdaq:CHINA), Citi Trends (Nasdaq:CTRN), Hot Topic (Nasdaq:HOTT), Breeze Eastern Corp. (AMEX:BZC), Astro-Med (Nasdaq:ALOT) and Cost Plus (Nasdaq:CPWM).
It will be interesting to see how the chart structure plays out today. The market has had a nasty habit of late of rejecting new highs, which is a topping issue, but the moves have taken place on light volume and haven’t generated much downside follow through, which suggests investors are in a directional tug-of-war in this price range. Look for resistance today in the Russell at 744 and 750, with support down at 731, 726 and 720.50.
