Up on confidence rise despite horrid home sales data
Small-cap stocks pushed higher on the opening, maintaining an early gain on a jump in consumer confidence that helped counter absolutely dreadful reports on the housing market. At 10:04 a.m. ET, the Russell 2000 (NYSE:IWM) was up 4.04, or 0.85%, at 479.12.
The new home sales report came in at an annualized rate of 407,000 units, which was below the forecast for 415,000. But the truly scary news came from the existing home sales data, which showed sales at an annual rate of 4.49 million units, way off the 4.93 million forecast. The pace of home sales plunged a record 8.6% in November and the median home price dropped to $181,300, which was a 13.2% annual decline, the largest since records have been kept over the past 40 years.
Despite the gloomy home news, consumer confidence as seen in the Michigan sentiment survey rose to 60.1, which was better than the forecast of 58.6, and which helped counter the horrendous home sales report. Earlier this morning, the GDP report came in at minus 0.5%, which was in line with expectations. The GDP data marked the final revision for the third quarter and reflected the sharpest decline in GDP from the previous quarter since Q3 2001 right after the 9/11 attacks.
In overnight trading, European shares were slightly firm, but Asia stocks took a hit, with car makers still in the spotlight. As for U.S. automakers, credit ratings for both General Motors Corp. (NYSE:GM) and Ford Motor Co. (NYSE:F) were slashed. Shortly after the open, GM was down 11%, while Ford was down 12%. Both automaker stocks also took a hit during Monday’s trading.
In other company news this morning, Textron Inc. (NYSE:TXT) announced plans to eliminate non-core financial services businesses. In addition, the airplane maker said they would trim some 2,200 jobs to cut costs in a difficult economic environment. Many major firms have announced job-cutting measures in recent weeks, including Caterpillar Inc. (NYSE:CAT), which said Monday they would slice management pay in addition to recent job reduction plans.
Individual small caps on the move this morning included Highland Steel & Vanadium Corp. Ltd. (Nasdaq:HSVLY), which jumped 12% and shows promising bottoming action on daily charts as the South African steel maker struggles to recover off the November lows. Loral Space and Communications Inc. (Nasdaq:LORL) was up 2.8% trying to recoup some of the big slide Monday. LORL has been a strong performer in recent days, climbing from a low on Dec. 1 near $6 to the current price above $14. TechTarget Inc. (Nasdaq:TTGT) was up nearly 10% as the IT media firm tries to sustain a nice rally off the November lows. On the downside, American Greetings Corp. (NYSE:AM) slumped 21% as the greeting card company took an earnings-related hit.
From a technical analysis perspective, the market is basically stuck in a sideways trading range defined by 491-497 on the upside and 416 on the downside (461 from a shorter-term glimpse). For today, look for resistance at 481, 491 and 497. Meanwhile, support comes in at 473, with the critical point down at 461.
