Weekly claims, GDP weigh on small caps

It’s been a rollercoaster ride thus far for small caps, most recently trending deeper into the red along with the S&P 500 and the Dow after a gloomy weekly unemployment claims report and a weaker-than-expected read on GDP dragged equities lower. 

At 12:46 p.m. ET, the Russell 2000 (NYSE:IWM) was down 3.44, or 0.48%, at 715.42, while the Dow down 0.98%, or 113.01, at 11,470.68.

The weekly claims number, reported this morning, spiked more-than-expected to 448,000 from last week’s 404,000 level. The claims number, which was substantially above the median forecast of a decline to 395,000, was pushed higher by an emergency unemployment program. The number was the single largest weekly claims figure in more than five years. Although this survey was taken after the numbers were collected for Friday’s monthly employment release, it has heightened jitters ahead of the Labor Department’s release tomorrow. 

The second-quarter number for GDP, also out this morning, wasn’t comforting either. The nation’s domestic growth clocked in at 1.9% for the second quarter, below the forecast of 2.3%. Additionally, GDP for the past 3 years was revised downward. Fourth quarter GDP was reduced to minus 0.2%, the first decline in quarterly GDP since 2001.

"The revisions were ugly and will fuel the recession debate," Andy Busch, global foreign exchange strategist for BMO Capital Markets, said in an email. "Today's numbers were a big disappointment and will rev up the doom-gloom crowd to call for the end of the world. July was brutal. Let's hope we can focus on the Olympics -- I'm still expecting/hoping to see a stabilization occur in August without the massive swings July presented."

Although the weak GDP number and claims took the limelight today, there was some hopeful economic news in the abyss. The Chicago Purchasing Managers report came in stronger than expected. PMI was 50.8, above the forecast of 49 and above 50 for the first time since January.

For the first time in awhile, gyrations in crude oil prices were not the focal point. Crude sold off this morning, after spiking over $4 Wednesday, and continues to tread in the red. A barrel of light sweet crude slipped $2.40 to roughly $124 mid-session.

The economic reports managed to smother uplifting merger and acquisitions news. Bristol-Myers Squibb Co. (NYSE:BMY) made a bid to acquire ImClone Systems Inc. (Nasdaq:IMCL) ...

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