Russell 2000 lower on the day, higher on the week

Small-cap stocks took a mild dip Friday, pressured by pre-weekend profit-taking from traders who were eager to cash in on the recent upswing, by jitters over sagging consumer sentiment and by soaring crude oil prices. The Russell 2000 (NYSE:IWM) closed down 2.21, or 0.30%, at 741.17. Despite the sloppy finish Friday, small-cap shares still notched the highest weekly close of 2008.

Small-cap shares have been a leading performer of late versus large-cap index products, reminiscent of the long bull market run from 2002 to 2007 in which small-cap products paced the way toward record highs. However, the Russell 2000 did close lower Friday while the S&P 500 was up slightly, which is a mild caution sign looking ahead to next week’s action.

In addition to the aforementioned profit-taking desire, the University of Michigan consumer sentiment survey tumbled to 28-year lows for the month of May when the data was released Friday morning. The lows underscore the fragility of the recent stock market rally, especially when consumer spending funds are crimped by soaring gasoline and food prices.

Crude oil took flight Friday, climbing to nearly $128 dollars a barrel. Although some energy stocks stand to benefit from higher crude prices, for the most part these record levels are seen as an overall negative to stocks because the economy is still powered by spending. Goldman Sachs, a key investment banking and research firm, on Friday raised its price targets on crude oil, which can only send shivers down the consumer spine – especially heading toward the start of the summer holiday driving season in the United States.

The stock market appeared to push through Friday’s “double witching” options expiration without too much volatility. Once the S&P 500 moved well past the concentrated strike at 1,400 late this week, it took away some of the excitement surrounding expirations.

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