Surging oil sends small caps south
Small caps declined after the ring of Tuesday’s opening bell, attempted to mount a comeback at noon after breaking through initial resistance, but declined during afternoon trading. Soaring crude oil prices, worrisome economic reports, the sinking greenback and a decline in international markets are burdening investors. Weak retail reports and Federal Reserve Vice Chairman Donald Kohn’s comments that policymakers are likely to hold interest rates steady provided additional concern for Wall Street.
At 2:09 p.m. ET, the Russell 2000 (NYSE:IWM) was up 4.70, or 0.64%, at 733.75.
Crude oil jumped to a new record high, climbing above $129 dollars a barrel amid tight stocks for diesel fuel and solid demand out of China and South America that is countering soft demand from the United States. With gasoline prices in some metropolitan areas moving above $4 dollars a gallon, another record high in crude oil will not likely be embraced by stock market traders, even if a handful of energy stocks stand to benefit.
The Labor Department’s producer price index report showed higher energy and food costs might be inflicting damage on other parts of the economy. The producer price index rose 0.2%, better than the expected 0.4% rise. However, skyrocketing gas prices mean the data is quickly outdated. Investors were more interested in the “core” producer price index, which edged up 0.4%, doubling expectations. This jump in the core tightens margins for businesses and forces them to consider raising prices, which can be suicidal in a sluggish economy where consumer discretionary spending is already pinched by lofty food and energy costs.
Individual small caps of note this afternoon included SMART Modular Technologies (Nasdaq:SMOD), which tumbled about 13%, gapping lower on the opening on revised guidance news. Loral Space and Communications (Nasdaq:LORL) was off about 9%, after sloppy earnings. The First Bancshares, Inc. (Nasdaq:FBMS) has shed about 17% despite no releases from the company. China TechFaith Wireless Communication Technology Ltd. (Nasdaq:CNTF) shares are down 15% after the handset designer missed first-quarter earnings estimates by a penny. China GrenTech Corporation Ltd. (Nasdaq:GRRF), another maker of wireless products, is down some 13% despite no announcements.
On the upside, Rudolph Technologies (Nasdaq:RTEC) was up nearly 7%, gapping higher through the 20-day moving average without fresh news. Mexco Energy Corp. (AMEX:MXC) is skyrocketing 47% after the Midland, Texas-based oil producer announced late Monday that it completed drilling a well in Loving County, Texas.
