Small caps seen lower after sluggish retail sales
Small-cap stocks are expected to open lower, pulled down by soft August retail sales and a downward revision to July numbers. The Russell 2000 (NYSE:IWM) was expected to start the day about 0.4% lower, which would translate to an open near 716.
The retail sales report was at minus 0.3%, which was softer than the forecast for a rise of 0.2%. In addition, last month’s figure was revised downward to minus 0.5%, compared with the reported figure of minus 0.1%. The immediate market response was that S&P 500 futures tacked on three more handles to the downside and the dollar weakened against the euro.
At the same time that the weak retail sales report was released, the PPI report came in at minus 0.9%, which was better than the consensus projection for a drop of 0.5%. The “core” rate, which excludes food and energy prices, came in at 0.2%, which was in line with expectations.
The market still will receive data on business inventories and the Michigan sentiment survey at 10:00 a.m. ET, but those reports typically would be overshadowed by the retail sales/PPI tandem.
Ahead of the open, crude oil prices were up about $1 a barrel toward $102, with traders leery of being short ahead of the landfall for Hurricane Ike. However, if Ike doesn’t damage facilities, there could be a Gustav-like slide in energy prices come Monday morning, especially with Saudi Arabia saying that they don’t plan to reduce oil production.
On the individual equity front, traders are still keeping a close watch on Lehman Brothers Holdings Inc. (NYSE:LEH) amid chatter overnight that a large commercial bank might step up to purchase the nation’s fourth-largest investment bank.
The chart picture shows a nice recovery rally Thursday to serve up one of the few bullish patterns in recent weeks. Still, the market is basically range-bound and at current prices is flat to lower for the week. Look for resistance today at 720.50, then at 726. Meanwhile, support is pegged at 711.50, then at 704.50 and 701.
