Russell slumps in afternoon trading

Will Atkinson | Jul 02, 2008 2:31pm EDT | Comment

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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 deviation has swelled.

Broad market sectors on the rise this afternoon were highlighted by school services, insurance, department and discount stores, technology retailers, major drug companies and money center banks. On the downside, coal, iron and steel, fabricated products, metal mining, construction and agricultural machinery and water transportation companies were attracting sellers.

Among overseas stock markets, Asian indexes finished mostly lower on concerns about inflation. European markets rose slightly higher.

Individual small caps on the move this afternoon include Schawk, Inc. (NYSE:SGK), which is up some 17% after the Des Plaines, Ill.-based digital imaging provider reported early Wednesday that its first-quarter earnings clocked in at $4.3 million, or $0.15 per share, which topped Wall Street’s expectation of earning $0.13 per share. The9 Ltd. (Nasdaq:NCTY) has jumped nearly 15% despite no announcements from the China-based online game operator. LCA Vision Inc. (Nasdaq:LCAV) is up 6%, bouncing off move lows forged in recent days. Isle of Capri Casinos (Nasdaq:ISLE), which jumped up some 14% on earnings news, is now down 1.12% after investors reacted negatively to a midday conference call with analysts.

On the downside this afternoon, Avis Budget Group Inc. (NYSE:CAR), tumbled 16% to new move lows as the company updated its outlook. Dollar Thrifty Group (NYSE:DTG) is plunging 29%, still reeling from a profit warning issued Tuesday. Aladdin Knowledge Systems Ltd. (Nasdaq:ALDN) is plummeting about 31% on soft earnings results.