Russell sinks amid record oil, jobs data

Small-cap stocks edged lower Thursday, unable to match gains registered in large-cap indices as the specter of record high oil prices and high unemployment were enough to hold back the Russell 2000 (NYSE:IWM). The Russell closed down 6.56, or 0.98%, at 665.78, the lowest daily close since March 19.

Despite the negative finish, the market did mount a modest solid bounce off the morning lows, finding support above 660, which is the next big test for an index that is once again back in bear market territory and flirting with a hard retest of the March trough.

Even though there seemed to be a little disconnect between the news and price action today, some traders weren’t that surprised with the overall trends. “I think a portion of Wednesday’s sell-off was linked to jitters over the employment report. The market was bracing for a payroll number closer to minus 100,000,” Nick Kalivas, vice president of financial research with MF Global, said in an email interview.

Also, Kalivas said that the weak performance in small caps compared to the Dow and S&P 500 was tied to a wave of profit-taking in small-cap energy shares, which were up sharply in the second quarter.

In some ways, price action today was relatively unsettling as headline figures on monthly employment and a rate hike by the ECB would seem to be bearish, but were embraced as far better than the “whisper” numbers bandied about in a worst-case scenario. In the case of employment data, the headline figure came out at minus 62,000, which was relatively close to the median forecast for a loss of 60,000. However, when the ADP report came out Wednesday at minus 79,000, it prompted some talk that the Labor Department figure could be closer to minus 100,000, which meant that losing “only” 62,000 non-farm jobs suddenly didn’t seem all that bad. It’s a little more tricky to shrug off the 5.5% unemployment rate however, which analysts expected to dip to 5.4% or even better after last month’s dramatic 0.5% leap was supposedly a statistical quirk. Regardless, the market chose to take . . .

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