Small caps slip into red after soft consumer sentiment data
Small-cap stocks pushed higher in early trading, but slipped into the red after sobering consumer sentiment figures from the University of Michigan. At 10:01 a.m. ET, the Russell 2000 (NYSE:IWM) was down 2.96, or 0.41%, at 714.12.
The University of Michigan’s consumer sentiment survey came in below expectations at 62.6% versus the median forecast of about 63.5%, and at 26-year lows, which appeared to spark a wave of selling across equities. The downside press after the Michigan numbers was a little surprising, because the survey seldom moves the market more than a few ticks. However, it may have simply been just an excuse for short-term longs to book profits ahead of the weekend instead of battling through key overhead chart resistance.
Once again, the market appeared to find initial buying interest on the back of earnings news, with American Express (NYSE:AXP) beating the forecast this morning, and climbing about 3% after the cash open. However, tech leader Microsoft (Nasdaq:MSFT) stumbled about 4% after the opening on sluggish earnings, so the news was mixed on some of the big name issues early today. Overseas stock market index products generated a nice rally, which provided a boost to investor psychology to start the session. European shares rose to three-week highs, while Japan’s Nikkei was up 2.3%.
President Bush held a very brief announcement about 15 minutes ahead of the stock market opening to let Americans know that their economic stimulus rebate checks were literally in the mail. The immediate response in stock futures trading was modest, but S&P 500 futures were up about two handles in the 10 minutes or so after Bush’s appearance.
Crude oil futures jumped in overnight trading, climbing back toward $118 per barrel amid a worker strike in Nigeria and a facilities shutdown in the North Sea ahead of a planned weekend strike at a Scottish refinery. Higher-energy prices have typically been a drag on small caps of late, but appear to be overshadowed early today by upbeat earnings and a firm dollar.
The dollar has been on a recovery move since making record lows against the euro a few days ago. Although a soft dollar makes it easier to sell goods to overseas customers, it also mirrors weak economic conditions. In addition, small caps tend to have less exposure to overseas sales, which means a weak dollar can favor large caps.
Small-cap companies slated to release earnings today at or after 11:00 a.m. ET include: UCBH Holdings Inc. (Nasdaq:UCBH); Empire District Electric Co. (NYSE:EDE); Horizon Lines Inc. (NYSE:HRZ); Bel Fuse Inc. (Nasdaq:BELFB); Gehl Co. (Nasdaq:GEHL); and CE Franklin (AMEX:CFK).
Among small-cap stocks, Progenics Pharmaceuticals Inc. (Nasdaq:PGNX) shot up 22% early after FDA approval for its constipation drug. Wilshire Bancorp Inc. (Nasdaq:WIBC) was up 13% on earnings news, and Ariba Inc. (Nasdaq:ARBA) gapped higher and was up 11% on earnings. On the downside, SiRF Technology Holdings (Nasdaq:SIRF) was down nearly 19% on earnings, and Sucampo Pharmaceuticals (Nasdaq:SCMP) was down 18% without any fresh news (in fact, at a quick glance, several pharma companies were seeing large downside moves this morning).
From a sector standpoint, automobile manufacturers, systems software and tobacco shares were early losers. Meanwhile, health-care facilities, tires and rubber, home furnishings and casinos were attracting buyers.
The Russell is moving toward important long-term resistance at 724, which represents a 38.2% Fibonacci retracement line of the entire bear market collapse. The first time the market approached that point a few days ago, sellers emerged, so a test there today is definitely an important event. If the Russell can push through 724, then the next key resistance test comes in at 731, which marks a double top from early February. If small caps start to stall this morning, support is at 714, then at 705.
