Russell slumps in afternoon trading

Small-cap stocks briefly opened higher after the opening, but have steadily slumped in midday and afternoon trading. Bearish sentiments were fueled by the Commerce Department’s report that factory orders showed the weakest performance in three months during May and the continuing ascent of crude oil prices. The National Employment report also added to gloomy news, with payrolls down by 79,000. At 2:27 p.m. ET, the Russell 2000 (NYSE:IWM) was down 12.55, or 1.81%, to 679.04.

During May, factory orders rose by 0.6%, which met Wall Street’s expectation but gave nervous investors no reasons to buy. The Commerce Department’s report showed waning demand for steel, heavy machinery and autos. Soaring fuel prices, weak economic growth and the credit crisis continue to keep investors jittery as long-term prospects remain uncertain.

Crude oil prices gushed higher in afternoon trading to $142.64 a barrel in recent trading. The U.S. dollar is down against the euro and flat against the yen.

The ADP National Employment Report showed a decline of 79,000 in payrolls, which marked the largest decline since November 2002. In addition, ADP revised last month’s gain downward to 25,000 from 40,000. When the ADP report was released about 8:15 a.m. ET, the news sparked a bounce in Treasury futures, trimmed overnight gains in the dollar against the yen and sparked a pullback in overnight gains in stock index futures. The weak ADP figures were troubling ahead of the big monthly employment report slated for Thursday morning.

Analysts at Goldman Sachs cautioned that the correlation between the ADP report and the actual Labor Department monthly employment release has not been that reliable of late. Goldman said that from January 2000 through October 2007, the ADP served up a much tighter projection of the jobs report, but since then the standard . . .

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