Tame rise as crude recovery, TARP comments help

Kevin Pendley | Jan 13, 2009 10:20am EST | Comment

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Small-cap stocks edged slightly lower on the open, pulled down by declines in overseas markets but a bounce in crude oil prices into the stock market opening helped limit selling interest, as did Federal Reserve comments on the TARP. At 9:54 a.m. ET, the Russell 2000 (NYSE:IWM) was up 3.79, or 0.81%, at 472.58.

The market appeared to slip initially, then stage a recovery move during the first speech of the year by Federal Reserve Chairman Ben Bernanke, who was speaking ahead of the open this morning in London. Bernanke said that financial stress has spilled over into the global economy and that the timing of a recovery remains “uncertain.” He also said that the government should mop up some of the toxic assets that supposedly were the initial focus of the TARP, which appeared to stir the recovery pop off pre-market lows.

The international trade report showed that the U.S. deficit narrowed by 28.7% in November, which marked the largest contraction in 12 years. However, the narrowing of the trade gap wasn’t because U.S. manufacturers suddenly sold a bunch more widgets, it was because of weak demand for import goods and sinking energy prices. In all, the November import number collapsed 12%, which was a record decline.

Crude oil prices were down about $1 a barrel overnight, but rallied back into positive territory just ahead of the stock market open today, which might have helped the early action in energy and commodity stocks. Shortly after the open, crude oil prices were up about $0.70 a barrel. Copper futures touched limit losses of 5% in China trading overnight, which is a troubling sign for the economy as copper is seen as a key barometer of industrial and construction demand. China imports and exports were down in the latest report, which also sends shivers about global growth prospects.

In overseas trading, European and Asian markets appeared to be “catching up” with the slide Monday in U.S. equities. Europe stocks were down about 2%, while Asian equities were off about 3%, with mining, energy, telecom, bank and tech stocks taking a hit.

Individual small caps making a move this morning included InterOil Corp. (AMEX:IOC), which rose 12% as the firm updated drilling progress on a reservoir in Papua, New Guinea. Lexington Realty Trust (NYSE:LXP) rose 14%, essentially recovering Monday’s big decline. Symmetry Medical Inc. (NYSE:SMA) climbed 13% as the medical implant firm tried to rally after sinking to the lowest daily close in more than a year on Monday. On the downside, Cepheid (Nasdaq:CPHD) gapped lower and fell 18% gene analysis firm reported earnings that didn’t match up with investor expectations. AMB Property Corp. (NYSE:AMB) slipped 8% as the firm made some dividend announcements.

The chart picture for small caps carries a modest bearish tilt following recent violations of key support points at 491 and 473 and also a slide back below the 20- and 50-day moving averages, which could attract some “black box” type of selling. As for today’s action, support comes in at 461, then very little until the Russell approaches the figure line at 450. On the upside, resistance is at 473, then at 481 and 491