Still up, but well off highs; 491 still a difficult test
Small-cap stocks remained higher into the midday time frame, but the market did pull back well off the morning highs. A White House lifeline to automakers lifted market sentiment, and tech stocks were solid performers, helping to counter declines in retail and some commodity names, but the morning rise appeared to be on precarious footing heading into afternoon trading. At 12:28 p.m. ET, the Russell 2000 (NYSE:IWM) was up 7.17, or 1.50%, at 486.34.
Looking at S&P sector activity, the best performers were industrial real estate investment trusts (REITS), automobile manufacturers, IT consulting firms, gas utilities companies, managed health care firms, home entertainment software — and interestingly, oil exploration, oil production, and oil equipment and services firms. In fact, energy stocks were actually up about 1% at midday, even though crude oil prices were down about $0.70 a barrel and tumbled to fresh 4 ½-year lows earlier today.
The market could be vulnerable to a “buy-the-rumor, sell-the-fact” response to the automaker bailout now that the aid package is a known event. The UAW (autoworkers union) has already asked President-elect Obama to step in and address “unfair” terms within the bailout package.
Looking again at sector activity, the poorest performing groups included forest products, steel companies, home improvement retailers, footwear manufacturers, department stores and apparel and accessories firms. The S&P Retail Index was off 2.2%. This is supposed to be the busiest shopping weekend of the year, but it will take a miracle to put a nice pretty Christmas bow on this recession-year spending lull. And it probably won’t help matters that snow storms are coursing through parts of the Midwest (including Chicago) and also into the Northeast.
Individual small caps on the move today include Alamo Group Inc. (NYSE:ALG), which jumped 22% as the snow removal and tractor equipment product maker has seen unusually wide price swings this week. Midas Inc. (NYSE:MDS) jumped 24% as the Canadian life sciences company appears to be breaking out to the upside after an extended bottoming process. Bottomline Technologies Inc. (Nasdaq:EPAY) rose 17% as the payment solution firm continues to rally off the late November lows. On the downside, Eagle Bulk Shipping Inc. (Nasdaq:EGLE), gapped lower and tumbled 26% as the owner of dry bulk vessels suspended dividends and announced financing details.
Looking at chart activity in the Russell today, the market looks poised to finally make a powerful and convincing push through the 491 resistance zone that we have been watching now for some time. Despite intraday breaches of that area, the market has not been able to mount a decisive closing push through that resistance, which adds a little extra drama to this afternoon’s price action.
