Bulls charging after Gustav destruction not as bad as feared

Small-cap stocks shot higher this morning, as the bulls came charging out of the gate when crude oil prices collapsed overnight. At 10:01 a.m. ET, the Russell 2000 (NYSE:IWM) was up 12.03, or 1.63%, at 751.53.

Crude oil prices fell hard today as Hurricane Gustav hit landfall in Louisiana, but appeared to spare key Gulf of Mexico energy production facilities. At one point ahead of the stock market opening, crude oil prices were down some $9 dollars a barrel, tumbling below $107. If the energy market remains under pressure, then prices at the gasoline pump should fall, which would provide relief to consumers and shift money back toward other expenditures.

The ISM Manufacturing Survey came in at 49.9, which was just a tad above the forecast of 49.6. The market reaction to the data was relatively tame, with trader attention focused more on the commodity arena.

Small caps were pacing the early advance in equities this morning, just slightly outperforming the Dow and topping the S&P 500 by about 0.5%. Speaking of the S&P 500, that index product was testing important resistance along the 1,300 line, which has been a difficult hurdle to jump in recent weeks. Definitive price action above 1,300 could trigger some new money into stocks and prod short-covering from traders who have been successfully shorting rallies in stocks in recent weeks.

The U.S. dollar was in full rally mode this morning, parlaying the collapse in energy prices to higher territory. The greenback stormed to fresh move highs against the euro, climbing 0.9% to the highest point since early February. In addition, the dollar was up about 0.8% versus the yen. The combination of a soaring buck and sinking crude tugged at a host of commodity markets, with gold down 4% and cocoa . . .

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

Already a member? Please log in below