Small caps push higher on firm dollar, dip in commodities
Small-cap stocks pushed higher Thursday, with the Russell 2000 (NYSE:IWM) climbing 8.96, or 1.27%, to 717.07. Small caps assumed leadership among equity index products on the rise, fueled by a bounce in the U.S. dollar and a drop in crude oil prices. Financial stocks and insurers provided a significant lift to equities big and small, with Merrill Lynch (NYSE:MER) jumping nearly 8% as the company raised its dividend, and insurance giant Travelers (NYSE:TRV) climbing 5% as the company upgraded its 2008 outlook.
Commodities took a tumble today, which may have eased some of the food and energy fears that have weighed on investor psyche and made headlines in national and international media. Just two days after a USA Today poll said that rising food costs were a major concern for a majority of consumers, news hit around the country of rice being rationed at grocery stores because of shortages. However, the Commodity Research Bureau Index tumbled 1.6% today, which may have provided a lift to stocks, especially since crude oil came off about $3 per barrel from its lofty perch.
Investors also appeared to breathe a sigh of relief about the economic outlook when weekly claims came out at 342,000, much better than the forecast of 375,000. Even though durable goods orders were relatively soft and the New Home Sales report was awful, market focus seemed to settle in on the claims data as a bright enough spot to counter the other economic news. As it stands, the durables data tends to fluctuate quite a bit month-to-month, and everyone already knows that the housing market is floundering. The only data of note Friday morning comes from the Michigan sentiment index, which comes out at in the vicinity of 10:00 a.m. ET.
Within individual small-cap shares, Progenics Pharmaceuticals (Nasdaq:PGNX) shot up nearly 35% without fresh news, while NextWave Wireless (Nasdaq:WAVE) surged 33% on heavy volume on news that the company was looking to sell off wireless holdings. Also on the upside, GSI Commerce (Nasdaq:GSIC) climbed 23% on earnings, and Encore Wire Corp. (Nasdaq:WIRE) was up over 22% following solid earnings. Stamps.com (Nasdaq:STMP), up 18%, was another stock to receive an earnings lift Thursday. Southern Community Financial (Nasdaq:SCMF) was up only 1.5%, but did so on heavy volume without news.
On the downside, Vasco Data Security International (Nasdaq:VDSI) lost almost 25% on soft earnings, and L.B. Foster (Nasdaq:FSTR) was down about 20% after gapping lower on earnings news. Taser International (Nasdaq:TASR) tumbled 20% on a gap decline and heavy volume. The company released earnings, but also was named in a lawsuit from a competitor.
Among broad market sectors, automobiles jumped 10%, no doubt fueled by Ford Motor Co. (NYSE:F), which reported much better-than-expected earnings. Other sectors faring well today included homebuilders, which rose 6% and investment banking and brokerage shares, which were up 6%. On the downside housewares and specialties were down 5%, fertilizer stocks were down 4% and coal was down 3.5%.
Technically, the Russell posted an outside session rally Thursday, which is a short-term bullish signal. The market continues to gyrate between quiet and big move days, although today’s advance was tamer than the pattern in previous sessions. The Dow climbed to the highest point since January, and the Russell held above the 20-day moving average, which is a positive signal. The market still faces significant resistance in the 724 range on Friday. A pop through that point opens the door toward a double top at 731. Meanwhile, support Friday is just below the market at 714, then down at 705 and 700.
