Small caps slouch as oil stands tall
After opening higher, small caps have been beaten down mid-session, as crude oil futures gushed higher and the troubled financial sector weighed on stocks. At 1:37 p.m. ET, the Russell 2000 (NYSE:IWM) was down 1.81, or 0.25%, at 723.92.
Crude oil prices were up to $137.76 a barrel in recent trading after reports surfaced that Israel executed a practice strike on Iran’s nuclear facilities. Additionally, revelations that Shell cannot meet its contractual obligations to export oil from Nigeria provided support for higher crude prices. One of Shell’s Nigerian oil fields was attacked by militants on Thursday.
In morning trading, crude was trading lower following a weekend pledge from Saudi Arabia to increase production. However, the announcement was widely expected and any bump from the announcement was already baked into crude futures. Some investors also saw the Saudi offer as fraudulent because it was so small.
Despite the rise in crude oil prices, the dollar is up against the yen and euro in Monday midday trading.
In large cap headlines, Bunge Ltd. (NYSE:BG), a giant fertilizer and oilseed processing company, announced plans to purchase Corn Products International (NYSE:CPO) in a deal worth $4.4 billion. Investors reacted negatively to the announcement, with BG shares down more than 11% in midday action. The stock is moving lower even though Bunge increased its earnings forecast. CPO has jumped some 17% on the news.
Financial stocks have been pummeled in recent weeks by investors amid ongoing worries about the credit crunch. Although some stocks in the financial zone might benefit from bargain hunters this week, there were additional analyst downgrades on banks and against home lenders overnight, which could keep that area on the defensive. Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) were off early today after Lehman Bros. analysts increased their loss forecast on the pair.
Broad market sectors on the rise this afternoon include oil and gas operations, oil well services and equipment, coal energy, metal mining and natural gas utilities. On the downside, casinos, airline transportation, home improvement retailers, apparel retailers and regional banks were attracting sellers.
Small caps of note included Barrier Therapeutics (Nasdaq:BTRX), which shot up 130% on news that the firm was being purchased by Stiefel Laboratories in a deal worth $4.15 a share. Also on the upside, ChemGenex Pharmaceuticals Ltd. (Nasdaq:CXSP) was up almost 24% despite no fresh announcements. The stock is topping its 20-day high of $19.99
Small caps attracting sellers this afternoon include Peerless Manufacturing (Nasdaq:PMFG), which slumped 7%, without fresh news. Also, Main Street Capital (Nasdaq:MAIN), tumbled about 8% to 52-week lows. North Central Bancshares, Inc. (Nasdaq:FFFD) is down some 21% despite no new news. Another regional small-cap bank, United Community Bancorp (Nasdaq:UCBA), is down 12.5%, also without any fresh news.
