Small caps sink after bleak employment report
Small-cap stocks opened lower, tugged down by a sobering picture of the jobs situation in the United States after the monthly employment report showed a staggering number of jobs have been lost in November. At 9:59 a.m. ET, the Russell 2000 (NYSE:IWM) was down 9.58, or 2.18%, at 429.95.
The Labor Department report showed that unemployment climbed to 6.7%, the highest rate since 1993. Meanwhile, the jarring loss of 533,000 jobs in November was the worst decline since December 1974. What’s more, job losses for September and October were revised upward, meaning that the United States shed 1.25 million jobs in the last three months alone and nearly 2 million so far this year. Our neighbors to the north are also feeling the pain, as data this morning revealed that job losses in Canada climbed to the highest point in 26 years.
It will be interesting to see if investors are still willing to bet that all these terrible economic reports are already priced into the stock market and try to jump-start a rally as the day progresses. There has consistently been talk that these dreadful economic reports are simply not surprises anymore; however, one cloud hanging over the market is the fate of U.S. automakers. Some speculate that if General Motors Corp. (NYSE:GM) is forced into bankruptcy it could ignite another dramatic free fall in the stock market. GM shares were up 5% after the open. Thursday’s talks on Capital Hill seemed to lead to little headway, but the Big 3 are back at it today in Washington and most observers still expect lawmakers will grant some type of “bridge loan” aid package for the embattled automakers.
Crude oil prices slipped about $1 a barrel from steady levels overnight after the stunning employment release. Worries about demand destruction amid a global recession continue to pummel energy prices. Overnight, India, the second-largest country on the planet in terms of population, announced their first price reduction for gas prices in two years. With crude oil prices wobbling and the jobs picture darkening, energy shares were in retreat mode early today, with the Energy Select Sector SPDR Fund off 2% shortly after the open.
Individual small caps on the move this morning included Orexigen Therapeutics Inc. (Nasdaq:OREX), which tumbled 34% as the biopharma firm announced plans to change its clinical focus and realign management. Big Lots Inc. (NYSE:BIG), gapped lower and slumped 11% as the close-out retailer reported soft earnings. Buffalo Wild Wings Inc. (Nasdaq:BWLD) fell 10% as the restaurant chain rejected Thursday’s rise to the highest point since mid-November. On the upside, Liquidity Services Inc. (Nasdaq:LQDT) rose 11% as the online auction company received an earnings-tied boost.
The chart picture for the Russell retains a long-term dynamic bear market structure, with some mild short-term bottoming potential tossed into the mix. The market has basically been stuck in a range this week defined by last Friday’s high and Monday’s collapse low. A breakout in either side of that range (473 on upside; 416 on downside) is needed to suggest a new powerful move is ready. Looking at today’s action, there is support at 424.50, 416 and 406, while resistance is at 454, 464 and 473.
The Labor Department report showed that unemployment climbed to 6.7%, the highest rate since 1993. Meanwhile, the jarring loss of 533,000 jobs in November was the worst decline since December 1974. What’s more, job losses for September and October were revised upward, meaning that the United States shed 1.25 million jobs in the last three months alone and nearly 2 million so far this year. Our neighbors to the north are also feeling the pain, as data this morning revealed that job losses in Canada climbed to the highest point in 26 years.
It will be interesting to see if investors are still willing to bet that all these terrible economic reports are already priced into the stock market and try to jump-start a rally as the day progresses. There has consistently been talk that these dreadful economic reports are simply not surprises anymore; however, one cloud hanging over the market is the fate of U.S. automakers. Some speculate that if General Motors Corp. (NYSE:GM) is forced into bankruptcy it could ignite another dramatic free fall in the stock market. GM shares were up 5% after the open. Thursday’s talks on Capital Hill seemed to lead to little headway, but the Big 3 are back at it today in Washington and most observers still expect lawmakers will grant some type of “bridge loan” aid package for the embattled automakers.
Crude oil prices slipped about $1 a barrel from steady levels overnight after the stunning employment release. Worries about demand destruction amid a global recession continue to pummel energy prices. Overnight, India, the second-largest country on the planet in terms of population, announced their first price reduction for gas prices in two years. With crude oil prices wobbling and the jobs picture darkening, energy shares were in retreat mode early today, with the Energy Select Sector SPDR Fund off 2% shortly after the open.
Individual small caps on the move this morning included Orexigen Therapeutics Inc. (Nasdaq:OREX), which tumbled 34% as the biopharma firm announced plans to change its clinical focus and realign management. Big Lots Inc. (NYSE:BIG), gapped lower and slumped 11% as the close-out retailer reported soft earnings. Buffalo Wild Wings Inc. (Nasdaq:BWLD) fell 10% as the restaurant chain rejected Thursday’s rise to the highest point since mid-November. On the upside, Liquidity Services Inc. (Nasdaq:LQDT) rose 11% as the online auction company received an earnings-tied boost.
The chart picture for the Russell retains a long-term dynamic bear market structure, with some mild short-term bottoming potential tossed into the mix. The market has basically been stuck in a range this week defined by last Friday’s high and Monday’s collapse low. A breakout in either side of that range (473 on upside; 416 on downside) is needed to suggest a new powerful move is ready. Looking at today’s action, there is support at 424.50, 416 and 406, while resistance is at 454, 464 and 473.
About the Author
Kevin Pendley covers the Russell 2000 index for SmallCapInvestor.com and writes a weekly technical analysis column.
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