Profit worries; sinking commodities extend slide

Small-cap stocks started out the week with a whimper, extending Friday’s slide as investors unload stocks amid fears about corporate profits during one of the worst recessions in history. Energy and commodity markets were hammered today, which escalated selling interest in companies with close ties to physical markets and reinforced worries about the slumping economy in front of another push of data later this week. The Russell 2000 (NYSE:IWM) closed down 12.50, or 2.60%, at 468.80, the lowest daily close of 2009. For the year, small caps are down 6.1%, while the Dow is off 3.4% and the S&P 500 is down 3.7%. The fact that small caps are still leading the way down so far this year is cause for concern, running contrary not only to bottoming hopes, but also a season that is supposed to favor small caps.

Financial stocks – particularly banks – joined commodities as a noteworthy soft spot for equities today, but in reality the pain was spread around just about everywhere. Looking at S&P sectors, only distillers and packaged food companies had noticeable gains; meanwhile sizable declines in the double digit range were found in all of the following sectors: industrial real estate investment trusts, tire and rubber companies, metal and mining stocks, coal producers, homebuilders, diverse financial services firms, steel companies and construction firms.

Energy stocks were a big drag on the market, with the Energy Select Sector SPDR Fund off 3.8%. Crude oil futures in the U.S. closed down nearly 8%, shedding $3.24 down to $37.59. But the story in commodities today comprised much more than just energy; grains markets were ravaged, with corn sinking some 7% in the morning to touch limit losses. Meanwhile, gold lost 4% and the Gold and Silver Index fell 6.5%, with mining stocks among the worst performers on the day. While some of the losses in commodities might have been exacerbated by a strong dollar, it is primarily a reflection of soft demand amid difficult times. The Commodity Research Bureau Index fell 4% today, which is a big one-day moving for an index that reflects price action in 19 different physical markets.

Today marks the unofficial start of first-quarter earnings season, and investors were bracing for plenty of bad news on the profit front. After the close, Alcoa Inc. (NYSE:AA) reported a larger-than-expected loss. Alcoa closed down . . ..

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