Small caps push lower as soft earnings counter claims dip
Small-cap shares pushed lower early Thursday, unable to sustain a mild opening bump when weekly claims numbers came in better than expected. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was down 6.46, or 0.91%, at 701.65.
The New Home Sales report, which came out at 10:00 a.m. ET were weak, which was no surprise, and took some of the supportive edge off the weekly claims data. New home sales were at an annual rate of 526,000 last month, which was below the forecast of 585,000, and was the lowest rate since October 1991.
It should be noted that durable goods orders, which also came out ahead of the opening this morning, were softer than expected. In addition, the weekly claims figures are often volatile, and even though today’s headline number was better than the forecast, the claims numbers still point to extensive layoffs and a rise in the unemployment rate.
Even though the market was able to sink its teeth into some fresh economic data this morning for the first time since Tuesday, the focus point remains fixed on earnings, which served up mixed signals into today’s action.
Among large-cap headline companies, Starbucks Corp. (Nasdaq:SBUX) missed the forecast and was pummeled early today, trading down 10% just after the cash U.S. opening. In addition, Amazon.com Inc. (Nasdaq:AMZN) had sloppy results and was down 4% early today. On the upside, Ford Motor Co. (NYSE:F) had a surprising jump in earnings and was up nearly 6%.
Within the small-cap spectrum, Encore Wire Corp. (Nasdaq:WIRE) shot up 17% on solid earnings, while Spartan Motors Inc. (Nasdaq:SPAR) also got an earnings-related boost, climbing 12% after the regular open. GSI Commerce (Nasdaq:GSIC) was up nearly 19% after earnings and Commercial Vehicle Group (Nasdaq:CVGI) was up about 16% after releasing earnings on Wednesday.
On the downside, Monarch Casino & Resort (Nasdaq:MCRI) tumbled 15% after releasing quarterly results, and L.B. Foster (Nasdaq:FSTR) was down 22% on earnings. Barrett Business Systems Inc. (Nasdaq:BBSI) gapped lower on the opening, and was down 20% after releasing first-quarter results. Vasco Data Security International (Nasdaq:VDSI) was off 20%, also on soft earnings.
The chart picture for the Russell carries some short-term caution signs. A bearish head-and-shoulders top is visible on intraday studies, and if the market slips through 700, then the pattern hints at downside potential toward the 685 zone. For immediate trading action, support is visible at the figure near 700, then down at 695. A breach of the latter could see a support vacuum down to 685. Meanwhile, resistance on a bounce is up at 715, then at 724.
It’s worth noting that the U.S. dollar was on firm footing early today, gaining 1.15% versus the euro, and 0.7% against the yen. A sinking dollar has been a worry for small caps compared with large caps, so a firming dollar tone would likely boost the Russell 2000/Dow spread, which tumbled earlier this week to the lowest point since January. Despite the firm dollar tone this morning, small-cap shares were once again losing ground to large caps in morning trading, pulled down by ongoing banking concerns and high domestic cost issues.
