Small caps slightly higher on better earnings
After opening higher today, small-cap stocks were mostly higher at mid-session, in part due to better-than expected earnings reports from large caps. Many key players reported weak outlooks, though, that put pressure on small caps. Strong economic data kept investors cautiously optimistic that the U.S. economy could start to crawl out of the red.
At 1:06 p.m. ET, the Russell 2000 (NYSE:IWM) was up 0.07, or 0.01%, at 686.82.
With earnings season well underway, large-cap stocks were driving the market — though not altogether forward. JPMorgan Chase & Co. (NYSE:JPM) reported earnings that beat estimates by more than 22%. By market value, JPMorgan is the largest U.S. bank. JPMorgan’s jump helped continue the rally of financial stocks after days of bleak news about the U.S. banking industry. On Wednesday Wells Fargo & Co. (NYSE:WFC) announced an increase of 10% in its dividend after posting solid results.
On the downside, The Coca-Cola Company (NYSE:KO) dropped 4% on below-average volume after reporting its second-quarter profits had dropped 23% from a year ago. The beverage retailer said its weak earnings were due to lowered soda demand from U.S. customers. News of the weak earnings dragged down shares of consumer goods. Internet retailer eBay Inc. (Nasdaq:EBAY) also tumbled 14% after giving an unimpressive outlook.
Government reports showed weekly jobless claims rose to 366,000 this week, a figure that was well below expectations for a jump to 380,000. Housing starts rose 9.1% while analysts had been expecting a drop of 1.5%. Despite this, single-family home construction sunk 5.3% in June to a 17-year low while construction of multi-family homes skyrocketed 42.5% from the same month a year ago.
For the first time in days, the U.S. Federal Reserve and crude oil prices weren’t in the spotlight. Crude oil was lower overnight and was down at mid-session to $133.87 per barrel, a far cry from the records highs over $147 seen earlier this month. A government report Wednesday showed larger-than-expected oil reserves, which promptly drove down the price of crude.
Among other large caps in the news was Nokia Corp. (NYSE:NOK), the No. 1 cell phone maker, which reported second-quarter earnings fell 61% from a year ago. But, the report still came in above Wall Street expectations, leading Nokia to upgrade its outlook for the 2008 worldwide handset market. Steelmaker Nucor Corporation’s (NYSE:NUE) second-quarter profits jumped 68% but the company dropped its outlook because of its inventory costing method. Shares fell more than 10% on the outlook.
Broad market sectors on the rise in today’s trading include furniture and fixtures; gold and silver; containers and packaging; and retail home improvement services. Slipping into the red are iron and steel; grocery; department and discount services; and casinos and gaming.
Among individual small caps snatching headlines was Catalyst Semiconductor Inc. (Nasdaq:CATS), which skyrocketed 54% on news ON Semiconductor Corporation (Nasdaq:ONNN) would pay $115 million in stock for the company. CVB Financial Corp. (Nasdaq:CVBF) gained 18% after posting better-than-expected second quarter earnings.
Insteel Industries Inc. (Nasdaq:IIIN) sank 19% in early trading today after the company announced a bleak 2008 and 2009 outlook because of a softening in non-residential construction. Despite this, Insteel’s third-quarter results beat Wall Street estimates.
Book manufacturer and specialty publisher Courier Corporation (Nasdaq:CRRC) skidded more than 15% after announcing before the opening it had clocked a net loss for the third quarter, the results of weak performance at one of its subsidiaries. Lumber distributor Universal Forest Products Inc. (Nasdaq:UFPI) dipped 4% after the company posted lower second-quarter profits on a weaker economy and lower cost of lumber.
