Small caps lag rally move in big caps

Kevin Pendley | Nov 21, 2008 12:53pm EST | Comment

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Small caps remained lower into midday trading, unable to draft off support from moderate gains in large caps as investors still have risk aversion on their mind. Energy stocks were providing a lift to large caps, but financial shares were struggling, pulling down lots of small banks in the small-cap universe. At 12:39 p.m. ET, the Russell 2000 (NYSE:IWM) was down 2.87, or 0.75%, at 382.43, but up 11 handles from the new bear market lows set earlier in the day.

There was a giant snap-back in Treasury yields today, driven by ideas Thursday’s panic rise in yields was overdone and by some desire to bargain hunt for big-cap energy stocks. The yield on the long-bond was up more than 8% at mid-session, which is a startling one-day move. There was also some thought that buying interest in large caps was driven by options expirations and fewer small caps see significant options activity. However, the general notion is that options expirations tend to mirror dominant trends for the expiration period, and there is no doubt that stocks have been headed sharply lower ahead of today’s expirations.

Financial shares remain a big drag on the market, with Citigroup Inc. (NYSE:C) extending the freefall. C shares were down 12% at midday and are off a stunning 70% during the month of November. JP Morgan Chase and Co. (NYSE:JPM) was down 11% and JPM shares have been sliced in half since Nov. 5. The Financial Select Sector SPDR was down 4.3% at midday.

Energy giant Exxon Mobil Corp. (NYSE:XOM) was up 2.5% and providing a major lift to the Dow, but the rise in big-cap oil didn’t seem to have as much of an influence on small-cap commodity firms today — or at least not enough to counter sinking financials and a batch of soft profit reports.

Individual small caps on the decline today were dominated by small financial firms, outside of that arena Collective Brands Inc. (NYSE:PSS) was off 25% as the holding company for Payless Shoes and Stride Rite plunged to fresh 52-week lows. Red Robin Gourmet Burgers Inc. (Nasdaq:RRGB) was down 23% as the casual dining restaurant chain also made new move lows. Eateries in general are struggling in this environment and The National Restaurant News Index was down 1.1% at mid-session. Gold and silver companies dominated the top percentage gainers on the Nasdaq, with Pan American Silver Corp. (Nasdaq:PAAS) up 24% as the mining company appeared to benefit with other miners from an investor push for metals and a drop in the U.S. dollar against the euro. Silver Standard Resources Inc. (Nasdaq:SSRI) was another miner having a good day, rising 18%.