Small caps rise on lower crude prices, higher consumer confidence
Small cap stocks pushed higher in Tuesday afternoon, erasing some of Monday’s sizable drop as crude oil prices fell and investors digested a rise in consumer confidence. At 2:14 p.m. ET, the Russell 2000 (NYSE:IWM) was up 15.61, or 2.24%, at 711.72 while the Dow was up 176.60, or 1.59%, to 11,307.68.
The consumer confidence report clocked in at 51.9, which was above the forecast of 50 and which sparked a quick jump in the U.S. dollar while extending the morning rally in equities. Consumer spending makes up more than two-thirds of U.S. economic activity. Earlier this morning, investors reacted tepidly to the Case-Shiller Home Price Index, which slipped at a record pace to minus 15.8% in May.
Crude oil futures were pushing lower this afternoon, which provided some support to the stock market. In recent trading, crude oil fell $2.84 to $121.89 a barrel. OPEC president Chakib Khelil said that current prices for crude were “abnormal” and that prices could fall to $70 to $80 dollars in the long-term picture if the U.S. dollar strengthens and political tensions ease. The greenback was up this afternoon against both the euro and the yen.
Traders will keep a close watch on the financial arena again today following news overnight that Merrill Lynch (NYSE:MER) announced plans to write-down $5.7 billion in debt and raise $8.5 billion in capital through new stock sales. In the afternoon session, MER shares were up some 2%. Also within the financial spectrum, Citigroup (NYSE:C) was the target of negative analyst comments overnight, but is still up 2.75% this afternoon.
Small caps making the news this afternoon include A.H. Belo Corporation (NYSE:AHC), which is off 12% today after Goldman Sachs downgraded the publisher to “sell.” The Dallas-based newspaper company posted a second-quarter loss after Monday’s close and said it was planning to cut as many as 500 jobs. Teleradiology service provider Virtual Radiologic Corporation (Nasdaq:VRAD) fell more than 23% to a 52-week low in today’s trading after posting disappointing second-quarter results after Monday’s close. The Providence Service Corporation (Nasdaq:PRSC) has plummeted 47% today after lowering its second-quarter earnings guidance range to $0.26 to $0.28 per share, down from previous estimates of $0.36 to $0.38 a share. Wall Street is looking for earnings of $0.37 per share.
Among small caps seeing upside, shares of specialty and intermediate chemicals producer Stepan Company (NYSE:SCL) have hopped 18% today after announcing higher second-quarter earnings ahead of today’s opening. ArvinMeritor Inc. (NYSE:ARM) has gained 22% in today’s trading after reporting ahead of the opening that it had swung to a third-quarter profit. Headwaters Inc. (NYSE:HW) is up 24% in morning trading after the supplier of building materials and coal combustion products said early Tuesday that its third-quarter net income totaled $13.7 million, or $0.31 per share, which topped Wall Street’s expectation of $0.25 per share.
Broad market sectors on the rise this afternoon include airlines, casinos, iron and steel, printing services, furniture, apparel retailers, hotels and motels and investment services companies. Meanwhile, gold and silver, oil and gas operations, oil well services and equipment, fish and livestock and oil and gas-integrated energy companies were attracting sellers.
