Small caps slip on soft data, financial woes
Small-cap stocks slipped into negative territory shortly after the open as a pullback in crude oil prices was offset by soft economic data and yet another soft tone in the financial sector. At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was off 2.10, or 0.29%, at 728.62.
The Philly Fed survey came out at 10:00 a.m. ET and the headline figure came in at minus 17.1, which was well below the forecast for minus 10. The prices-paid index for the Philly Fed report was at the highest point since 1980. Also, at 10:00 a.m. ET, the leading indicators report came in just slightly better than the forecast, but the indicators data is somewhat dated, whereas the Philly survey is for June, so the market tends to react more to the Fed survey.
Before the opening today, weekly claims data came in slightly above the forecast at 381,000 and the four-week moving average for claims edged higher, which was a mild negative.
Health insurers were taking a beating this morning after Coventry Health Care Inc. (NYSE:CVH) lowered its outlook for the year. CVH shares tumbled 23% shortly after the open and pulled other stocks in the group down. WellPoint Inc. (NYSE:WLP) was off 5%, while Aetna Inc. (NYSE:AET) was down 4% and UnitedHealth Group Inc. (NYSE:UNH) was down 9%. The Morgan Stanley Healthcare Payors Index was down 7.3% early today.
Lehman analysts downgraded some farm insurance firms, saying that crop insurers were facing the worst losses in 15 years as floods ravage the Midwest, reducing spring plantings. Within that group, Ace Ltd. (NYSE:ACE) was down just 0.1%, XL Capital Ltd. (NYSE:XL) was off 1.2%, PartnerRe Ltd. (NYSE:PRE) down 0.6% and RenaissanceRe Holdings Ltd. (NYSE:RNR) down 0.2%.
Energy markets were volatile this morning, with crude oil prices gyrating up on supply issues from Africa, then sinking on worries about softer demand, especially after China announced plans to raise prices. Nigerian rebels attacked an offshore oilfield today which could curb production out of Africa. The dollar held onto to modest gains against the euro and yen shortly after the stock market opening.
Broad market sectors on the decline early today were paced by managed health-care providers, health-care services firms, thrifts and mortgage financial firms, consumer finance stocks, investment banking and brokerage firms and diverse financial services. On the upside, steel, coal, oil exploration and production and fertilizer stocks were attracting buyers.
Small caps on the move included BluePhoenix Solutions Ltd. (Nasdaq:BPHX), which gapped lower and tumbled some 21%. Pier 1 Imports Inc. (NYSE:PIR) slumped 17% following sloppy earnings news. Centene Corp. (NYSE:CNC) was down nearly 6%, gapping lower without fresh news to power the move.
Small caps attracting buying interest today included Casella Waste Systems Inc. (Nasdaq:CWST), which gapped higher and was up about 14% on solid earnings news. Also, The Pantry Inc. (Nasdaq:PTRY) was up 11% after affirming 2008 guidance.
Price action in equities could be choppy today and Friday as the market adjusts to the quarterly “quadruple witching” of options and index expirations for single stock futures, equity index futures, equity options and index options. The concentrated strikes for many of the major index products is above the market, which could act as a bullish magnet for stocks — but that theory won’t work if the market slides too far away from those strikes into Friday.
