Bulls and bears play tug of war with small caps

Jennifer Schonberger | Jun 19, 2008 12:42pm EDT | Comment

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After a rollercoaster morning, small caps stocks are trading shallowly in the green midday, as a deflation in crude oil prices offset somewhat lackluster economic reports.

At 12:44 p.m. ET the Russell 2000 (NYSE:IWM) edged up 3.33, or 0.46%, to 734.04, while the Dow is up 11.07, or 0.09%, to 12,040.13.

Crude has deflated mid-session, following a volatile morning. Crude oil prices initially climbed on supply issues from Africa, but then made an about-face after China said it will raise fuel prices sparking reactions that demand from the oil thirsty nation will decelerate. China has exhibited strong demand for oil, as the government has subsidized fuel prices until today.

As crude slid midday, the greenback gained against the euro and the yen.
In economic news, the Philadelphia Fed’s business outlook survey, which measures general economic activity in the Philly region, clocked in at minus 17.1 for the month of June, substantially below the forecast for minus 10. The prices-paid index for the report hit its highest point since 1980.

Also out this morning, the leading indicators report came in slightly better than forecasted.

Before the opening today, weekly claims data came in slightly above the forecast at 381,000 and the four-week moving average for claims edged higher, which was a mild negative.

“This is good news with a couple of caveats,” Jennifer Lee, a BMO Capital Markets economist, wrote in a research note today. “It barely dents the prior week's 27,000 run-up, which revised 2,000 higher, and is still well above the week before that, which had dropped 16,000 due to the end of the American Axle strike and U.S. holiday. The bottom line [is it’s] still not good news for the U.S. job market, but it could've been worse. Look for more payroll declines in June.”

In large cap headlines, Hewlett-Packard (NYSE:HPQ) slid after the technology juggernaut said it is reorganizing its printer unit as it grapples with sputtering growth. American International Group (NYSE:AIG) gained after Citigroup upgraded the besieged insurance and financial services company to a “buy” rating from “hold.”

Financials were under pressure mid-session, as reverberations from the everlasting credit crunch continued to flow through the market’s veins. Farm insurance firms in particular were losing ground after Lehman Brothers downgraded a handful on account of the raging floods in the Midwest that have demolished planting grounds.

Among industry groups, railroads, truckers and rental and leasing services led the market higher midday, while office supplies, coal and insurers were the leading groups under pressure.

Small caps moving higher on the session midday include, Casella Waste Systems Inc. (Nasdaq:CWST), which is up 13% after the garbage collector and recycler said late Wednesday that it expects 2009 revenue to range higher than Wall Street’s expectation. The firm’s fourth-quarter results also beat expectations. This morning, JPMorgan upgraded Casella to “overweight” from “neutral.” Convenience store chain The Pantry, Inc. (Nasdaq:PTRY) is up 10% mid-session after reaffirming its full year fiscal 2008 guidance this morning. The Sanford, N.C.-based firm also said that it expects its earnings for its fiscal third quarter to decline from the year-ago quarter, but that it expects earnings to beat the consensus on Wall Street.

On the downside, shares of BluePhoenix Solutions Ltd. (Nasdaq:BPHX) have plunged 32% midday after two investment banks cut their earnings estimates for the Israeli software maker. Both firms maintained a “buy” rating on the stock, while one slashed his price target to $15 from $20.