No one shops for small caps today, as few shop at retailers

The Russell 2000 has slipped to its lows on the session midday, as a weak July retail sales report and a rebound in crude oil prices have kept small caps submerged in the red.

At 12:35 p.m. ET, the Russell 2000 (NYSE:IWM) had skidded 6.87, or 0.92%, at 738.07, while the Dow slumped 165.2, or 1.42%, to 11,477.27.

The Census Bureau reported this morning that retail sales dropped 0.1% in July, down from June’s 0.1% uptick and the weakest in five months. Weak auto sales were the main culprit that dragged down sales, as a soft economy and sky high gas prices continued to take a toll on demand for cars. Sans autos, retail sales would have posted a 0.5% increase for July. However, even excluding auto sales, retail sales would have only been buoyed by consumption of gas on the part of higher prices, not higher demand. 

“This sales report marks only the beginning of the third quarter and though it is not looking very good for U.S. consumers, it wasn't quite as bad as expected,” BMO Capital Markets economist Jennifer Lee wrote in a note today. “But we could be seeing some final effects of the rebate checks here, and as they fade, real consumer spending likely fell for in Q3, the first in about 17 years.”

In other economic news, import prices soared 1.7%, which was above the forecast, and year-over-year prices were up 21.6%, the highest rate in 26 years.

The business inventory report came out at plus 0.7%, which was above the forecast for a rise of 0.4%. However, this data series is somewhat dated (June figures) and tends to have very little lasting impact on stock market traders.

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