Russell climbs to second highest daily close of 2008

Small-cap stocks mounted an impressive rally Thursday, eye-catching not for the severity of the climb, but for the ability to shrug off bearish economic data. Fresh worries about inflation and the jobs picture were fanned this morning, but those issues had a surprisingly short shelf life as investor appetite for riskier investments and the unwinding of long commodity trades continues to bolster equity markets. The Russell 2000 (NYSE:IWM) closed up 6.69, or 0.89%, at 754.38. The Russell is now down just 1.5% for 2008, while the Dow is off 12.3% and the S&P 500 down 11.9%. Very quietly, the Russell 2000 today generated the second highest daily close of the year, which puts all the shorts on a tight equity leash.

Although a big jump in consumer price inflation pulled down the stock market on the opening today, investors quickly set aside the data as “dated,” reasoning that recent sharp declines in the price of energy have not filtered into the official inflation numbers yet. Indeed, on a near-term basis, crude oil prices have collapsed some 21% from the summer peak and were down about $1 dollar a barrel today to $115. However, it was a volatile session for crude oil, as the market did bounce off the intraday low of $112.59 as traders are unsure if a cease-fire order between Russia and Georgia will hold up.

Elsewhere on the commodities front, soft markets were taking a hit today, with cotton down 2.3%, cocoa off 1.5% and sugar down 2.3%. Clearly, commodities are unwinding off a major bullish run and some of that money (most likely flush from big profits) is more than willing to take a stab at the stock market — especially within the small-cap arena. Playing a big role in the unraveling of commodity market inflation has been a dramatic strengthening in the U.S. dollar, which makes many physical goods sold on the world that are priced in dollars more expensive. Look at it this way, crude oil priced in dollar terms is still not extremely cheaper than it was at the . . .

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

Already a member? Please log in below