Small caps climb as commodities, financials power move
Small-cap stocks extended the morning rally into midday action, boosted by gains in commodity and financial stocks and some relief that the end was in sight for the political uncertainty surrounding elections in the United States. At 12:32 p.m. ET, the Russell 2000 (NYSE:IWM) was up 7.10, or 1.32%, at 545.60.
Even another downbeat reading on manufacturing activity today didn’t stall buying enthusiasm. Just a day after the ISM Manufacturing Survey came in at 38.9% -- well below the 50% contraction line -- today’s factory orders data came in at minus 2.5%, below the forecast for a drop of 1.5%. Although the market initially pulled back on the factory orders report, the rally quickly resumed and stretched out through mid-session.
Commodity shares were on a roll today, with agriculture products, metal and mining stocks, coal and gold all seeing sizable gains. The Energy Select Sector SPDR Fund was up 6% and crude oil prices shot 8% higher on reports that Saudi Arabia slashed output. Commodity stocks in general were lifted today by a sizable drop in the U.S. dollar, which tumbled some 2.8%, or more than 350 basis point against the euro, which makes goods priced in dollar terms more attractive. Among the big gainers were gold, copper and corn.
Soybean processor Archer Daniels Midland Co. (NYSE:ADM) jumped 17% on solid earnings, and other large-cap names getting an earnings lift today included MasterCard Inc. (NYSE:MA), which jumped 14% and lifted rival firm American Express Co. (NYSE:AXP) along for the ride, with AXP up about 5%.
Economic bellwether stock General Electric Co. (NYSE:GE) rose 8% on reports that the Treasury Department might use some of the $700 billion in rescue funds for corporate financial firms, such as GE’s Capital arm.
Of course, today’s financial stories were playing out in the shadows of the bigger election story as Americans wrap up a long and historic political campaign later this evening. Even though most market watchers expect front-runner Barack Obama to claim the White House, they are still watching to see whether or not the Democrats will also sweep up a large chunk of the open House and Senate seats as well.
Individual small caps in rally mode so far today were highlighted by Silver Standard Resources Inc. (Nasdaq:SSRI), which jumped 21% along with the resurgence in commodities. Carrizo Oil and Gas Inc. (Nasdaq:CRZO) rallied 22% on news of a joint venture to pursue growth in Marcellus Shale. On the downside, Animal Health International Inc. (Nasdaq:ANII), gapped lower and tumbled 57% on unusually heavy volume amid earnings news.
The Russell was testing an important resistance zone ranging from 546 up to 551, and even though the market was showing sizable gains today the upper edge of that zone was still holding the buyers at bay. A decisive push through 551 would open the door to another leg up for the move, with a target run toward 580 the immediate upside objective. If the market starts to falter this afternoon toward the close, then support comes in at 534.50, 525 and 520.
Even another downbeat reading on manufacturing activity today didn’t stall buying enthusiasm. Just a day after the ISM Manufacturing Survey came in at 38.9% -- well below the 50% contraction line -- today’s factory orders data came in at minus 2.5%, below the forecast for a drop of 1.5%. Although the market initially pulled back on the factory orders report, the rally quickly resumed and stretched out through mid-session.
Commodity shares were on a roll today, with agriculture products, metal and mining stocks, coal and gold all seeing sizable gains. The Energy Select Sector SPDR Fund was up 6% and crude oil prices shot 8% higher on reports that Saudi Arabia slashed output. Commodity stocks in general were lifted today by a sizable drop in the U.S. dollar, which tumbled some 2.8%, or more than 350 basis point against the euro, which makes goods priced in dollar terms more attractive. Among the big gainers were gold, copper and corn.
Soybean processor Archer Daniels Midland Co. (NYSE:ADM) jumped 17% on solid earnings, and other large-cap names getting an earnings lift today included MasterCard Inc. (NYSE:MA), which jumped 14% and lifted rival firm American Express Co. (NYSE:AXP) along for the ride, with AXP up about 5%.
Economic bellwether stock General Electric Co. (NYSE:GE) rose 8% on reports that the Treasury Department might use some of the $700 billion in rescue funds for corporate financial firms, such as GE’s Capital arm.
Of course, today’s financial stories were playing out in the shadows of the bigger election story as Americans wrap up a long and historic political campaign later this evening. Even though most market watchers expect front-runner Barack Obama to claim the White House, they are still watching to see whether or not the Democrats will also sweep up a large chunk of the open House and Senate seats as well.
Individual small caps in rally mode so far today were highlighted by Silver Standard Resources Inc. (Nasdaq:SSRI), which jumped 21% along with the resurgence in commodities. Carrizo Oil and Gas Inc. (Nasdaq:CRZO) rallied 22% on news of a joint venture to pursue growth in Marcellus Shale. On the downside, Animal Health International Inc. (Nasdaq:ANII), gapped lower and tumbled 57% on unusually heavy volume amid earnings news.
The Russell was testing an important resistance zone ranging from 546 up to 551, and even though the market was showing sizable gains today the upper edge of that zone was still holding the buyers at bay. A decisive push through 551 would open the door to another leg up for the move, with a target run toward 580 the immediate upside objective. If the market starts to falter this afternoon toward the close, then support comes in at 534.50, 525 and 520.
About the Author
Kevin Pendley covers the Russell 2000 index for SmallCapInvestor.com and writes a weekly technical analysis column.