Small caps soar as retail sales rise
The Russell 2000 (NYSE: IWM) posted a big rise following news of a surprising increase in U.S. retail sales in January. The small-cap index gained 16.45 points, or 2.33%, to 721.93, its third consecutive increase. The Dow Jones Industrial Average (INDU) advanced 178.83 points, or 1.45%, to 12,552.24.
On a year-to-date basis, the Russell 2000 has dropped 5.76%, while the Dow is missing 5.37% and the S&P 500 has fallen 6.89%.
Stocks small and large opened with a jump on news that retail sales rose 0.3% to $382.9 billion in January, according to the U.S. Commerce Department reported. The results beat economists’ forecast of a 0.2% decline and represent an improvement over December’s 0.4% drop.
Sales excluding autos also increased 0.3%, more than the projected 0.2%. Sales excluding gasoline rose just 0.1%.
The data put investors in a bullish mood, easing fears that a pullback in consumption that will send the economy into recession. Consumer spending is about 70% of U.S. gross domestic product.
But Arun Raha, vice president of Economic Research and Consulting for the North American operations of reinsurance company Swiss Re, cautions against reading too much into the data.
“While this was definitely better than another decline, it is not enough to ease fears that the economy remains weak, and that consumer spending is softening,” Raha said in a phone interview.
The numbers show that much of the gains were due to higher sales of cars and gasoline, while sales of many other goods declined.
A separate report by the Commerce Department showed that business inventories climbed by a greater-than-expected 0.6% in December, while business sales fell 0.5%.
That’s a sign of a weakening economy.
“The risk of recession in the 12 months remains elevated at around 55%,” Raha said.
The bulls nevertheless went on a rampage today, gaining strength as the session went on and making the Russell 2000 the biggest winner among the major U.S. indices.
Here are the day’s biggest percentage gainers and losers, along with top volume leaders, among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• Santander BanCorp (SBP), up 20% to $14.50.
• SPSS Inc. (SPSS), up 18% to $37.20 on news that fourth-quarter revenue and earnings beat expectations.
• Volcano Corp. (VOLC), up 17% to $14.45.
Biggest percentage losers:
• Blue Nile, Inc. (NILE), down 17% to $44.72 on news that its first-quarter net income guidance was below expectations.
• ANADIGICS, Inc. (ANAD), down 14% to $8.86 on news of disappointing first-quarter earnings guidance.
• Aftermarket Technology Corp. (ATAC), down 14% to $21.98 on news of a weak 2008 profit guidance.
Volume leaders:
• Dendreon Corp. (DNDN) 9,015,900 shares traded.
• ANADIGICS, Inc. (ANAD) 8,217,000 shares traded.
• SiRF Technology Holdings, Inc. (SIRF) 6,082,300 shares traded.
The day saw 17 small-cap stocks set 52-week lows, while 13 small caps established a 52-week high.
