Small caps tread red in shortened session
After opening lower, the Russell 2000 (NYSE:IWM) remains shallowly in the red on thin trading in a shortened trading session amid a mixed jobs report, a lower-than-anticipated ISM services reading and climbing crude prices.
While the small-cap index remains in the red, the larger-cap indices are climbing higher late morning. At 11:52 a.m. ET, the Russell 2000 was down 2.25, or 0.33%, to 670.09, while the Dow was up 103.16, or 0.92%, to 11,318.67. Equity markets will close at 1 pm ET, ahead of the Independence Day Holiday.
The Labor Department reported before the opening that the unemployment rate remained steady at 5.5% in June from May, a hair higher than the forecasted decline to 5.4%. However, non-farm payrolls tumbled 62,000, which was lower than the median forecast for a decline of 50,000. Employers remain cautious amid high energy prices and a sluggish economy. Construction, manufacturing and financial services were among the areas hardest hit, while education and health services, leisure and hospitality, and government showed gains.
“The unemployment rate stayed higher in June after soaring in May. This suggests that May’s surge in joblessness was more of a catch-up to the slow rise in the prior six months than a seasonal adjustment difficulty. Regardless, over the past year the number of unemployed has increased by 1.5 million to 8.5 million and the unemployment rate has increased by one percentage point to 5.5%. In the post-World War II period, every time the unemployment rate has jumped by a full percentage point in the course of a year, the economy has slipped into recession,” Steven Wood, chief economist with Insight Economics, said in an email.
The ISM Non-Manufacturing Survey came in at 48.2, below the median forecast of 51.5. A reading below 50 signals contraction, while a reading above 50 signals expansion. In addition, the prices paid index was the highest since the data began in 1997.
Crude oil prices gushed to new record levels above $145 dollars a barrel ahead of the opening, but have since given back ground. A barrel of crude oil was trading around $144 a barrel late morning.
Despite higher crude prices, the dollar rallied against the euro and the yen, as the European Central Bank expectedly raised its benchmark interest rate today by 25 basis points to 4.25% as the euro zone grapples with inflation. Expectations for a rate hike from the ECB were baked in.
In broader industry groups, construction, railroads and footwear rallied the most during late morning trading, despite gloomy economic data. On the downside, oil and gas, insurance and crops remained under pressure.
In small-cap headlines, Acme Packet Inc. (Nasdaq:APKT) slumped 32% after the telecommunications company issued second-quarter earnings guidance below Wall Street’s expectations. Shares of ARYx Therapeutics Inc. (Nasdaq:ARYX) skidded 23% after the biopharmaceutical company said late Wednesday that consumer goods giant Procter & Gamble Company (NYSE:PG) had ended its collaboration with the company. Also on the downside, TranS1 Inc. (Nasdaq:TSON) shares flopped 30% after the Wilmington, N.C.-based medical device company said late Wednesday it lowered its revenue estimates for the second quarter.
On the upside, Chindex International, Inc. (Nasdaq:CHDX) jumped 15% after the provider of international health-care services in China said this morning that it received a long-awaited approval from China’s State Food and Drug Administration for the introduction of new products.
