Russell 2000 surges midday on greenback

Small-cap stocks surged midday buoyed by a rallying U.S. dollar, falling oil prices and better-than-expected economic data.

At 1:41 p.m. ET, the Russell 2000 (NYSE:IWM) was up 12.26, or 1.71%, to 728.44, while the Dow spiked 183.03, or 1.43%, to 13,003.16.

The greenback has been charging higher today. Midday, the dollar had rallied more than 1% against the euro to $1.5451 — its highest point since late March. The dollar’s rally comes on the heels of Wednesday’s 25 basis point cut in the fed funds rate.

“[The] market is indicating to the Fed that the Fed has done enough,” Andy Busch, Global foreign exchange strategist for BMO Capital Markets said in an email. “Sometimes it is more important to see how the market reacts to data/event rather than the data/event themselves. This is the case today, as we had relatively weak jobless claims coupled with as expected personal income/personal spending and the U.S. dollar rallied hard. To me, this signals a clear break in the downtrend for the U.S. dollar.”

As the dollar rallied, crude oil dipped $2.58 to $110 a barrel, after tumbling hard yesterday on a jump in inventories.

In economic news, better-than-expected numbers from the ISM Manufacturing Survey and consumer spending helped lift stocks.

The ISM Manufacturing Survey — released at 10:00 a.m. ET — came in at 48.6%, slightly above the forecasted 48%. While, anything below 50 signifies contraction, the index has not fallen far enough to signal a broader recession. Skittish traders were also calmed after the Commerce Department reported this morning that consumer spending rose a more-than-predicted 0.4% in March. Consumer spending accounts for two-thirds of the GDP. 

On a cloudier economic note, investors shrugged off worse-than-expected economic data. The Construction Spending report, which came out this morning, was down 1.1%, which was below the forecasted loss of 0.6%.

Weekly Jobless Claims data reported this morning before the opening also clocked in worse than anticipated. For the week ended April 26, jobless claims jumped to 380,000, above the forecasted 360,000.

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