Small caps rise, defying economy
The Russell 2000 (IWM) rose for the first time this week despite news that painted a bleak picture of the U.S. economy. The small-cap index added 10.29 points, or 1.49%, to 702.78. The Dow Jones Industrial Average (INDU) added 46.90 points, or 0.38%, to 12,247.00.
On a year-to-date basis, the Russell 2000 has shed 8.26%, while the Dow has let go 7.67% and the S&P 500 has left behind 8.95%.
Small-cap stocks went on a rollercoaster ride that started with a decline out of the gate as investors reacted to news that U.S. retail sales in January generally missed already low expectations.
That’s a worrying sign that consumers have pulled back and the economy is either headed for a recession or already in one.
Grabbing the headlines was Wal-Mart Stores, Inc. (NYSE: WMT), which announced that its January same-store sales increased a paltry 0.5%, below the forecasted 2%. If American consumers really are reining in their spending, the squeeze won’t be felt just by the world’s largest retailer.
“Smaller-cap retailers are definitely more volatile than their larger brethren, many times because they are focused on one particular niche,” said Eric Beder, a retail analyst with investment bank Brean Murray, Carret & Co., in an email.
The Russell 2000 index recovered from its initial fall and soon rose, only to drop below the flat line again at about 11 a.m. ET, on news that pending home sales fell 1.5% in December, according to the National Association of Realtors.
The Washington, D.C.-based trade organization’s pending home sales index fell to a reading of 85.9 from a downwardly revised level of 87.2 in November. Economists were expecting the measure to decline 1%.
But the bears were not able to hold on for long, and small-cap stocks were soon rising again.
Elsewhere, the U.S. Labor Department reported that initial jobless claims for the week ended Feb. 2 fell a less-than-expected 22,000 to 356,000 from the previous week’s upwardly revised figure of 378,000.
The data is another warning flag that economic growth is slowing, but at least today investors didn’t seem to mind.
Here are the day’s biggest percentage gainers and losers, along with top volume leaders, among companies with a market cap between $100 million and $750 million:
• Isramco Inc. (ISRL), up 27% to $38.03 on news the company has sold its assets in Israel for $13.6 million.
• Sport Supply Group, Inc. (RBI), up 23% to $11.25.
• PC Mall, Inc. (MALL), up 22% to $9.85 on news that fourth-quarter profit rose 169%.
• Orion Energy Systems, Inc. (OESX), down 43% to $8.51 despite news that third-quarter revenue increased.
• Gentium S.p.A. (GENT), down 19% to $7.90.
• Taleo Corp. (TLEO), down 18% to $17.12 on news of an analyst downgrade.
• SiRF Technology Holdings, Inc. (SIRF) 10,958,000 shares traded.
• Orion Energy Systems, Inc. (OESX) 4,699,100 shares traded.
• EMCORE Corp. (EMKR) 4,580,000 shares traded.
The day saw five small-cap stocks set 52-week lows, while 50 small-caps established a 52-week high.
