Economy worries stall upside push for small caps

Small-cap stocks opened lower Friday, pulled down by lingering worries about the economy, a dip in stock markets around the world overnight and a renewed safe-haven mentality ahead of the weekend. At 9:58 a.m. ET, the Russell 2000 (NYSE:IWM) was down 5.99, or 1.17% at 508.19.

A fresh batch of second-tier economic data debuted this morning, with the Michigan sentiment survey coming at 57.6, which represented a record monthly drop off the 70.3 reading in September. However, the figure was basically in line with expectations. The Chicago Purchasing Manager’s Survey came in at 37.8, which was well below the forecast of 48.3. Stock index futures slipped a tad after the Chicago report.

Earlier this morning, the personal income report came in at 0.2%, which was slightly better than the forecast for a meager gain of 0.1%. Meanwhile, the employment cost index was up 0.7%, which was in line with the forecast. Even though the market generated a nice rally Thursday in the face of a negative reading on quarterly GDP, there seemed to be a more subdued mood this morning, almost a sense that the economy isn’t going to improve anytime soon, so a recovery in the stock market could take time. Bulls will say that all the upcoming bad news on the economy is already priced into the market and that stocks will rally away from the lows long before the worst data comes out.

Japan’s Nikkei stock index slumped 5% overnight, even though the Bank of Japan delivered its first rate cut in seven years. However, the rate cut was already widely expected, setting up a “sell-the-fact” response from traders.

As the stock market lurched toward the end of a historic month investors seemed reluctant to extend a three-day buying spree in small caps and money was moving back into Treasury markets at the start of today’s activity. The yield on . . .

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