Russell slips into red as crude rally counters positive news

Small-cap stocks opened higher, but quickly slipped into negative territory, pulled down by a rally in crude oil prices, which raised a caution flag about consumer spending and inflation trends. An opening burst tied to overseas stock market gains, a firm dollar and strong tech earnings failed to gain traction, but remains a positive element in play looking forward today. At 9:57 a.m. ET, the Russell 2000 (NYSE:IWM) was down 1.28, or 0.17%, at 728.80, while the Dow was off 0.34% and the tech-laden Nasdaq 100 up 0.13%.

Tech stocks were lifted by solid quarterly results from Hewlett-Packard Co. (NYSE:HPQ) as the world’s largest computer maker topped the earnings forecast. HPQ shares were up 4.3% shortly after the open.

Crude oil prices were on the rise this morning, climbing more than $1.50 a barrel back north of $116, bolstered by Goldman Sachs analysts reiterating their forecast for $149 crude oil by the end of the year. In addition, energy prices were supported by short-covering in front of today’s weekly inventory report, which is expected to show a drawdown in crude stocks of some three million barrels. The bounce in crude oil prices was taking an early toll on airline stocks, with the AMEX Airline Index tumbling 7%, with small-cap carrier US Airways Group Inc. (NYSE:LCC) off 8%. In addition to the advance in crude oil, grains prices were called solidly higher today, despite a firm tone in the U.S. dollar.

The greenback was in rally mode overnight, rising about 0.3% against both the euro and yen, which suggests some confidence from overseas investors about the U.S. economy and U.S.-tied assets — including stocks. However, those overnight gains in the buck were trimmed after stocks turned lower.

Some confidence in equities heading into the opening was linked to a big rally overnight in the Chinese stock market, which soared 7% on talk that a government stimulus plan was in the works to bolster equities and spark a slowing economy. In addition to China, stocks in Hong Kong were up 2.1%, Taiwan up 0.9%, . . .

For access to the full article, you must be a registered member - it's FREE.

Already a member? Please log in below